Refer to Exhibit 15

question 2

Multiple Choice

Refer to Exhibit 15.2.Now assume that VF is considering changing from its original zero debt capital structure to a new capital structure with even more debt.This results in changes in the cost of debt and equity, and thus to a new WACC and a new value of operations.Assume VF raises the amount of new debt indicated below and uses the funds to purchase and hold T-bills until it makes the stock repurchase.What is the stock price per share immediately after issuing the debt but prior to the repurchase?

• A) $50.67
• B) $53.33
• C) $56.00
• D) $58.80
• E) $61.74

---

Definitions:

Economic Hypothesis

A proposed explanation for economic phenomena that is testable and can be confirmed or refuted by observation and experimentation.

Economic Principle

A widely accepted generalization about the economic behavior of individuals or institutions.

Cause and Effect

A relationship between events where one or more are the result of the other(s), a fundamental concept in establishing correlations in various fields.

Rational Self-interest

The principle that individuals tend to make decisions that result in the most personal benefit.