UNLEV Has an Expected Perpetual EBIT = $4,000

question 118

Multiple Choice

UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The firm is considering issuing $8,800 in new par bonds to add financial leverage to the firm. The proceeds of the debt issue will be used to repurchase equity. The cost of debt = 10% and the tax rate = 34%. There are no flotation costs.

Assume a stockholder owns 1,000 shares of UNLEV before the restructuring. The stockholder prefers a debt/equity ratio = 1.0. How could the stockholder use homemade leverage to achieve the restructuring without the help of UNLEV? Assume there are no taxes.

• A) The stockholder should borrow $1,330 and buy 1,000 more shares of UNLEV.
• B) The stockholder should borrow $2,660 and buy 1,000 more shares of UNLEV.
• C) The stockholder should borrow $1,330 and buy 2,000 more shares of UNLEV.
• D) The stockholder should lend $667 and sell 300 shares of UNLEV.
• E) The stockholder should lend $1,337 and sell 667 shares of UNLEV.

Understand the concept of geographic significance in shaping individual identities.

Recognize the impact of personal experiences with racism and privilege on individual perspectives.

Analyze the social constructions of race, sex, and sexuality within different racial communities.

Critique the influence of racial standards on beauty perceptions and practices.

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Definitions:

Genotype

The genetic constitution of an individual organism, referring to the specific alleles or variants at particular loci in the genome.

Phenotype

The set of observable characteristics of an individual resulting from the interaction of its genotype with the environment.

Allele Dominance

A genetic principle where one allele (variant of a gene) masks the expression of another allele at the same gene locus, determining the organism's phenotype.

Genomic Imprint

A phenomenon where genes are expressed in a parent-of-origin-specific manner, leading to differential expression depending on whether the gene is inherited from the mother or the father.