Use the Information for the Question(s)below

question 17

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 in debt at an interest rate of 5%.
-According to MM Proposition 1,the stock price for With is closest to:

• A)$8.00.
• B)$24.00.
• C)$6.00.
• D)$12.00.

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Definitions:

LIFO Conformity Rule

A tax regulation requiring companies that use the Last In, First Out (LIFO) method for tax reporting to also use it for financial reporting.

Tax Reporting

The process of preparing and submitting tax documents to relevant tax authorities, detailing income, deductions, and other tax-related information.

Financial Reporting

Refers to the process of producing statements that disclose an organization's financial status to management, investors, and the government.

Merchandise Inventory

Goods that a company buys to resell at a profit. It is a current asset on the balance sheet.