Barnes Baskets, Inc

question 33

Multiple Choice

Barnes Baskets, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08.
-Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase. BB 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) 11,001; $28.85
• B) 12,711; $35.62
• C) 13,901; $42.57
• D) 15,220; $54.31
• E) 17,105; $89.67

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Definitions:

Displaying Genitals

The act of exposing one's sexual organs in a public or private setting, which can vary in social acceptability based on context.

Unsuspecting Stranger

Describes an individual who is unaware of and unprepared for a particular situation or action that may occur, often used in contexts involving deception or surprise.

Transvestism

The practice of dressing and presenting oneself in a style or manner traditionally associated with the opposite sex, often for emotional or sexual satisfaction.

Transvestic Disorder

A condition characterized by an intense sexual arousal from cross-dressing, which may cause distress or impairments in social, occupational, or other important areas of functioning.