Margaret owns a stuffed animal shop. at first, it is just her daughter allison and her hand‑sewing stuffed bears, stuffed sharks, and stuffed giraffes in the spare bedroom. over time, margaret decides to rent a larger shop and hire more workers to out, increasing to a staff of 20 people. everything is still hand sewn. she notices, however, that her stuffed animal output increased much more than tenfold despite her work force increasing by that amount. however, any more than 20 workers slows down production. this is an example of

Pennewell publishing inc. (pp) is a zero growth company. it currently has zero debt and its earnings before interest and taxes (ebit) are $80,000. pp's current cost of equity is 10%, and its tax rate is 40%. the firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. refer to the data for pennewell publishing inc. (pp). pp is considering changing its capital structure to one with 30% debt and 70% equity, based on market values. the debt would have an interest rate of 8%. the new funds would be used to repurchase stock. it is estimated that the increase in risk resulting from the added leverage would cause the required rate of return on equity to rise to 12%. if this plan were carried out, what would be pp's new value of operations? a. $484,359 b. $521,173 c. $584,653 d. $560,748 e. $487,805