Use the Information for the Question(s)below

question 1

Multiple Choice

Use the information for the question(s) below.
Kinston Enterprises has no debt and a debt obligation of $47 million that is due now.The market value of Kinston's assets is $102 million,and the firm has no other liabilities.Assume that capital markets are perfect and that Kinston has 5 million shares outstanding.
-The number of new shares that Kinston must issue to raise the capital needed to pay its debt obligation is closest to:

• A)4.3 million.
• B)4.7 million.
• C)5.0 million.
• D)4.0 million.

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Definitions:

Cost Drivers

Factors or activities that have a direct impact on the total cost of a product or service.

Direct Labor Hours

The total hours worked by employees directly involved in the production process.

Absorption Cost

A cost accounting method that totals all costs associated with manufacturing a product, including all direct and indirect costs.