How many shares remain after the repurchase, Financial Accounting

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3:Barnes Baskets, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company.

BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08.Refer to Multi-Part 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. BB 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?

Please show how you got the answer. I want to learn how to answer the question not just answer it.

 


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