Merriwether Building Has Operating Income of $20 Million, a Tax

question 11

Multiple Choice

Merriwether Building has operating income of $20 million, a tax rate of 25%, and no debt.It pays out all of its net income as dividends and has a zero growth rate.The current stock price is $27 per share, and it has 5 million shares of stock outstanding.If it moves to a capital structure that has 40% debt and 60% equity (based on market values) , its investment bankers believe its weighted average cost of capital would be 10%.What would its stock price be if it changes to the new capital structure?

• A) $28
• B) $30
• C) $33
• D) $35
• E) $40

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Definitions:

Medicare Patients

Individuals who are covered under Medicare, a federal health insurance program primarily for people who are 65 or older, as well as for some younger people with disabilities.

CPT

Current Procedural Terminology, a set of medical codes used to describe diagnostics, treatments, and procedures for billing purposes.

ICD-9-CM

An outdated system used in the United States for classifying and coding diagnoses, symptoms, and procedures recorded in conjunction with hospital care, replaced by ICD-10-CM.

ICD-10-CM

ICD-10-CM stands for International Classification of Diseases, 10th Revision, Clinical Modification, a coding system used for diagnosing and classifying diseases.