Following Information Has Been Presented to You About the Gibson

question 22

Multiple Choice

following information has been presented to you about the Gibson Corporation. The company has no growth opportunities (g = 0) , so the company pays out all of its earnings as dividends (EPS = DPS) The consultant believes that if the company moves to a capital structure financed with 20% debt and 80% equity (based on market values) that the cost of equity will increase to 11% and that the pre-tax cost of debt will be 10% If the company makes this change, what would be the total market value (in millions) of the firm?

• A) $3,200
• B) $3,600
• C) $4,000
• D) $4,200
• E) $4,800

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Definitions:

Developmental Plasticity

The ability of an organism to change its phenotype in response to changes in the environment.

Integrative Plasticity

The ability of the brain to integrate and modify synaptic connections and networks in response to new information, sensory experiences, development, damage, or dysfunction.

Brain

The organ located in the head of an animal that coordinates its behavior and processes information received from the senses, enabling thoughts, memory, emotions, and movements.

Spatial Memory

The ability to remember the positions of objects, directions, and the physical layout of spaces and environments.