Use the Information for the Question(s)below

question 58

Multiple Choice

Use the information for the question(s) below.
You own your own firm and you need to raise $50 million to fund an expansion.Following the expansion,your firm will be worth $75 million in its unlevered form.You want to go ahead with the expansion,but you are concerned that you may not be able to maintain ownership of over 50% of your firm's equity.In other words,you are concerned that if you use equity to finance the expansion,you may lose control of your firm.
-Assume that capital markets are perfect,you issue $25 million in new debt,and you issue $25 million in new equity.Your ownership stake in the firm following these new issues of debt and equity is closest to:

• A)50%.
• B)55%.
• C)58%.
• D)33%.

---

Definitions:

Conscientious

Characterizing someone who is diligent, careful, and thorough, often with a strong sense of duty and responsibility.

Boundary Condition

Conditions at the limits or borders of a specific area or system that are used to determine its behavior or solutions.

Trait Observability

Pertains to how easily an individual's personality traits can be perceived and recognized by others.

Psychological Definition

A definition that pertains to concepts, processes, or phenomena within the domain of psychology, the science of mind and behavior.