The Following Information Has Been Presented to You About the Gibson

question 95

Multiple Choice

The following information has been presented to you about the Gibson Corporation. $$\begin{array} { l c } \text { Total assets } & \$ 3,000 \text { millionTax rate } &25\%\\\text { Operating income (EB TT) } & \$ 800 \text { millionDebt ratio } &0\%\\\text { Interest expense } & \$ 0 \text { millionW } \mathrm { ACC } &10\%\\\text { Net income } & \$ 480 \text { millionM/B ratio } &1.00×\\\text { Share price } & \$ 32.00 \mathrm { EPS } = \text { DPS }&\$3.20\end{array}$$ 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 8%.If the company makes this change, what would be the total market value (in millions) of the firm?

• A) $4,400
• B) $4,800
• C) $5,200
• D) $5,400
• E) $6,000

Describe the importance and application of systems theory in management.

Recognize the principles of the contingency approach and its significance in modern management practices.

Explain the concept of open and closed systems and their relevance to organizational structure.

Understand the criticisms of traditional human relations doctrine and how management theories evolve.