Pennewell Publishing Inc. $($PP$)$

Pennewell Publishing Inc. $($PP$)$ is a zero growth company. It currently has zero debt and its earnings before interest and taxes $($EBIT$)$ are $$80,000.$ PP$\text{'}$s

current cost of equity is $10\%,$ and its tax rate is $25\%.$ The firm has $10,000$ shares of common stock outstanding selling at a price per share of $$48\mathrm{.}00.$

Refer to the data for Pennewell Publishing Inc. $($PP$).$ 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 $9\mathrm{.}125\%$ and a new value of operations of $$657,534.$ Assume PP

raises $$230,137$ 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?

Remaining Shares; P Post

a$.7,000$;$$74\mathrm{.}26$

b$.6,500$;$$65\mathrm{.}75$

c$.7,500$;$$86\mathrm{.}18$

d$.6,959$;$$58\mathrm{.}03$

e$.6,649$;$$63\mathrm{.}48$