1. You issue $1,000,000 of debt and use the proceeds to repurchase equity. You originally had $100,000 shares of stock. The old stock price was $40 per share and the new stock price is $50 per share. The remaining number of shares outstanding is:
A. 75,000
B. 80,000
C. 125,000
D. 120,000
2. If a firm issues debt, uses the proceeds to repurchase equity, and replaces old debt:
A. old bondholders are hurt
B. remaining shareholders get stock worth the new price and shareholders who sell their stock back get the old price
C. a change that increases the Value of the firm will also increase WACC
D. all shareholders, including those who sell, get the new stock price