Use the Information for the Question(s)below

question 58

Multiple Choice

Use the information for the question(s) below.
You own your own firm and you need to raise $50 million to fund an expansion.Following the expansion,your firm will be worth $75 million in its unlevered form.You want to go ahead with the expansion,but you are concerned that you may not be able to maintain ownership of over 50% of your firm's equity.In other words,you are concerned that if you use equity to finance the expansion,you may lose control of your firm.
-Assume that capital markets are perfect,you issue $25 million in new debt,and you issue $25 million in new equity.Your ownership stake in the firm following these new issues of debt and equity is closest to:

• A)50%.
• B)55%.
• C)58%.
• D)33%.

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Definitions:

Stress Disorders

Conditions characterized by psychological and physical symptoms that result from substantial or prolonged stress, such as PTSD.

PTSD

Post-Traumatic Stress Disorder; a psychiatric disorder that can occur in people who have experienced or witnessed a traumatic event.

Y Chromosome

A sex chromosome that is typically present in males and is responsible for determining male biological characteristics.

Cortisol Levels

The concentration of cortisol, a steroid hormone, in the blood, which can vary due to stress, time of day, and health conditions.