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:

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Second Green Revolution

An ongoing movement aiming to increase agricultural production worldwide, similar to the first Green Revolution, but with a focus on sustainability and environment-friendly practices.

Inorganic Fertilizer

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The total value of all goods and services produced by a country's residents and businesses, regardless of where the production takes place.