Stock price per share immediately after the repurchase

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A company has operating income of $20 million, a tax rate of 40%, and no debt. It pays out all of its net income as dividends and has a zero growth rate. The current stock price is $40 per share, and it has 2.5 million shares of stock outstanding. If it moves to a capital structure that has 40% debt and 60% equity (based on market values), its investment bankers believe its weighted average cost of capital would be 10%. If this plan were carried out, what would be PP's new value of operations? How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?

Reference no: EM131560313

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