Use the Information for the Question(s) Below

question 70

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 $5000 of your own money to invest and you plan on buying Without stock.Using homemade leverage,how much do you need to borrow in your margin account so that the payoff of your margined purchase of Without stock will be the same as a $5000 investment in With stock?

• A) $10,000
• B) $5000
• C) $2,500
• D) $0

---

Definitions:

Routine Message

A standard or typical communication sent in the regular course of business or personal affairs.

Negative Information

Data or facts that may be unfavorable or detrimental to an individual's or organization's image or objectives.

Positive Message

Communication that conveys good news or a favorable outcome, often intended to motivate or encourage.

Audience Benefit

The advantage or positive outcome that an audience can gain from a message, presentation, or product.