Assume That PP Is Considering Changing from Its Original Capital

question 42

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.What is the stock price per share immediately after issuing the debt but prior to the repurchase?

• A)$45.90
• B)$48.12
• C)$51.06
• D)$53.33
• E)$58.75

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Definitions:

Human Capital

The economic value of an individual's skill set and knowledge, considered an asset in the production process.

Physical Capital

Refers to tangible assets used in the production of goods and services, such as machinery, buildings, and tools.

Productivity

The measure of the efficiency of production, often defined as the ratio of output to inputs in the production process.

Constant Returns To Scale

A situation in production where an increase in the input of resources leads to a proportionate increase in output, resulting in no change in average costs.