Use the Following Information to Answer the Question(s)below

question 21

Multiple Choice

Use the following information to answer the question(s) below.
d'Anconia Copper is an all-equity firm with 60 million shares outstanding,which are currently trading at $20 per share.Last month,d'Anconia announced that it will change its capital structure by issuing $300 million in debt.The $200 million raised by this issue,plus another $200 million in cash that d'Anconia already has,will be used to repurchase existing shares of stock.Assume that capital markets are perfect.
-At the conclusion of this transaction,the number of shares that d'Anconia Copper will have outstanding is closest to:

• A)5 million.
• B)15 million.
• C)20 million.
• D)40 million.

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Definitions:

Allowance Method

An accounting technique used to manage accounts receivable and bad debt by estimating uncollectible accounts at the end of each period.

Write Off

The accounting action of recognizing that an asset has reduced in value and reporting its loss.

Customer's Bill

A statement issued to a customer, outlining charges for goods or services provided.

Bad Debts Expense

The cost recognized by a business to account for receivables that are unlikely to be collected.