Refer to Exhibit 15

question 16

Multiple Choice

Refer to Exhibit 15.3.Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity.This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576, 923.Assume BB raises $259, 615 in new debt and purchases T-bills to hold until it makes the stock repurchase.What is the stock price per share immediately after issuing the debt but prior to the repurchase?

• A) $14.42
• B) $19.36
• C) $23.91
• D) $28.85
• E) $35.62

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Definitions:

Forward Contract

A financial derivative that represents an agreement to buy or sell an asset at a pre-agreed future point in time at a specified price.

Spot Rate

The current exchange rate at which a currency can be bought or sold for immediate delivery.

Settlement Date

The date on which a trade is finalized, and the buyer must make payment and the seller deliver the asset.

Fair Value Hedge

A type of hedge that aims to offset changes in the fair value of an asset or liability or an unrecognized firm commitment.