Use the Information for the Question(s) Below

question 55

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 markets conditions are met and that you can borrow and lend atthe same 5% rate as With. You have $5000 of your own money to invest and you plan on buying With shares. Using homemade (un) leverage, how much do you need to invest at the risk-free rate so that the payoff of your account will be the same as a $5000 investment in Without shares?

• A) $0
• B) $2500
• C) $4000
• D) $5000

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Definitions:

Data Analytics

The process of examining datasets to draw conclusions about the information they contain, often involving various data analysis methods and tools.

Distributional Errors

Mistakes made during performance appraisal processes that involve unfair distribution of ratings across employees.

Strictness Error

A bias in performance appraisal characterized by consistently rating employees more harshly than their performance deserves.