(The Following Data Apply to Problems 66, 67, and 68

question 57

Multiple Choice

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

• A) $14.42
• B) $19.36
• C) $23.91
• D) $28.85
• E) $35.62

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Definitions:

Depressive Episodes

Periods characterized by persistent feelings of sadness, despair, and a lack of interest or pleasure in everyday activities.

7 to 14 Days

A general timeframe often associated with the incubation period of certain diseases, or the time required for particular biological processes to occur.

4 to 6 Weeks

A time frame often referred to in various contexts, indicating a period about one to one and a half months long.

1 Year

A period of 365 days (366 in a leap year), used as a standard unit of time to measure durations and ages.