Use the Information for the Question(s)below

question 22

Multiple Choice

Use the information for the question(s) below.
Consider two firms,With and Without,that have identical assets that generate identical cash flows.Without is an all-equity firm,with 1 million shares outstanding that trade for a price of $24 per share.With has 2 million shares outstanding and $12 million in debt at an interest rate of 5%.
-Assume that MM's perfect capital market conditions are met and that you can borrow and lend at the same 5% rate as With.You have $5000 of your own money to invest and you plan on buying With stock.Using homemade (un) leverage you invest enough at the risk-free rate so that the payoff of your account will be the same as a $5000 investment in Without stock? The number of shares of With stock you purchased is closest to:

• A)100.
• B)425.
• C)1650.
• D)825.

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Definitions:

Objective

An objective is a specific, measurable, achievable goal or target that an individual or organization aims to accomplish within a defined timeframe.

Descriptive Statistics

Statistical methods that summarize and organize data to describe its main features without drawing conclusions beyond the data.

Central Tendency

A statistical measure that identifies the single value that best represents the central position within a dataset.

Dispersion

The spread of values around a central tendency, such as the variance or range within a set of data.