Use the Information for the Question(s) Below

question 4

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 dollars 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 at the same 5% rate as With.You have $5,000 of your own money to invest and you plan on buying With stock.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 $5,000 investment in Without stock?

• A) $2,500
• B) $0
• C) $5,000
• D) $4,000

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Definitions:

Auditory-evoked Response

An electrical potential in response to an auditory stimulus, used to assess hearing and brainstem function.

Tympanometry

A diagnostic test that measures the movement of the eardrum in response to changes in air pressure, indicating middle ear function.

Otoscopy

A visual examination of the ear canal and eardrum using an otoscope.

Tympanic Membrane

The medical term for the eardrum, a thin membrane that divides the outer ear from the middle ear and vibrates in response to sound waves.