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:

Interrupted Time Series Design

A quasi-experimental design where observations are made over time both before and after an intervention to detect whether the intervention has an effect distinct from underlying trends.

Observation

involves systematically capturing or recording behavior, phenomena, or events as they naturally occur, without manipulation by the observer.

Treatment

In research, an intervention or condition that is applied to a group of subjects to observe its effects, often compared to a control group without the intervention.

Extended Period

A length of time that is longer than average or expected, often used in the context of research to indicate the duration of a study or observation.