Refer to Exhibit 15

question 33

Multiple Choice

Refer to Exhibit 15.1.Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity.This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510, 638.Assume PP raises $178, 723 in new debt and purchases T-bills to hold until it makes the stock repurchase.PP then sells the T-bills and uses the proceeds to repurchase stock.How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?

• A) 7, 500; $71.49
• B) 7, 000; $59.57
• C) 6, 500; $51.06
• D) 6, 649; $53.33
• E) 6, 959; $58.78

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Definitions:

Fiscal Year

A one-year period used for financial reporting and budgeting, which does not necessarily align with the calendar year.

Federal Government

The national government of a federal country that is responsible for national affairs, the implementation of federal laws, and the administration of common interests and national decisions.

Marginal

Referring to the effect of a change in one unit on an overall condition, often used in the context of marginal cost, revenue, and utility in economics.

Payroll Tax

Taxes imposed on employers or employees, usually calculated as a percentage of the salaries that employers pay their staff.