Based on the Data in the Previous Two Problems, What

question 52

Multiple Choice

Based on the data in the previous two problems, what would the stock price be if VF issued the new debt and immediately used the proceeds to repurchase stock?

• A) $49.43
• B) $50.70
• C) $52.00
• D) $53.33
• E) $56.00
• (The following data apply to Problems 66, 67, and 68. The problems MUST be kept together, and they cannot be changed algorithmically.)
• 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.

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Definitions:

Slope

Refers to the measure of the steepness, incline, or grade of a line, indicating the rate at which the dependent variable changes over the independent variable.

Residuals

Differences between observed and predicted values in a statistical model, representing unexplained variation.

Predicted Values

Estimates or forecasts of a variable or outcome based on a model or analysis of correlated variables.

Actual Y Values

The observed values of the dependent variable in a data set or experiment, compared against predicted values in regression analysis.