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VanMannen Foundations, Inc. (VF)
VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below.

EBIT = $80,000
Growth = 0%
Orig cost of equity, rs = 10.0%
No. of shares = 10,000
Price per share = $60.00
Tax rate = 25%

Refer to the data for VanMannen Foundations, Inc. (VF). Now assume that VF is considering changing from its original zero debt capital structure to a new capital structure with even more debt. This results in changes in the cost of debt and equity, and thus to a new WACC and a new value of operations. Assume VF raises the amount of new debt indicated below and uses the funds to purchase and hold T-bills until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?

Debt/Value = 40% Value of new debt = $280,702
Equity/Value = 60% New WACC = 8.55%
a. $66.67
b. $77.37
c. $73.68
d. $70.18
e. $81.24


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