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Suppose Pestco, Inc., a profitable pest management firm, has 625 million shares outstanding with a share price of $80, and $25 billion in debt. If

Suppose Pestco, Inc., a profitable pest management firm, has 625 million shares outstanding with a share price of $80, and $25 billion in debt. If in three years, Pestco has 800 million shares outstanding trading for $100 per share, how much debt will Pestco have if it maintains a constant debt-equity ratio (D/E)?

a.

$40 billion

b.

$4 billion

c.

$160 billion

d.

$20 billion

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