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Suppose that Papa Bell, Inc.’s equity is currently selling for $42 per share, with 3.7 million...

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Finance

Suppose that Papa Bell, Inc.’s equity is currently selling for$42 per share, with 3.7 million shares outstanding. The firm alsohas 7,000 bonds outstanding, which are selling at 94 percent ofpar. Assume Papa Bell was considering an active change to itscapital structure so as to have a D/E of 0.4. Which type ofsecurity (stocks or bonds) would the firm need to sell toaccomplish this? sell bonds and buy back stock sell stocks and buyback bonds. How much would it have to sell?

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