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:

Monopolistically Competitive

A market structure in which many companies sell products that are similar but not identical, allowing for competition based on product differentiation.

Excess Capacity

A situation where a firm produces at a level less than its maximum output, often resulting in inefficiencies or higher production costs per unit.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power in setting prices.

Average Total Cost

The total cost of production divided by the number of units produced, indicating the cost per unit of output.