Assume That PP Is Considering Changing from Its Original Capital

question 56

Multiple Choice

Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity.This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638.Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase.PP then sells the T-bills and uses the proceeds to repurchase stock.How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?

• A)7,500; $71.49
• B)7,000; $59.57
• C)6,500; $51.06
• D)6,649; $53.33
• E)6,959; $58.78

---

Definitions:

Inductive Reasoning

"Reasoning from specific observations to make generalizations."

Deductive Reasoning

Reasoning from a general case that is known to be true to a specific instance.

Abductive

A form of reasoning that begins with observations and seeks to find the simplest and most likely explanation.

Subgoaling

The process of breaking down a larger goal into smaller, more manageable objectives.