Use the Information for the Question(s) Below

question 89

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 you borrow enough 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.The number of shares of Without stock you purchased is closest to:

• A) 425
• B) 1650
• C) 2000
• D) 825

---

Definitions:

CVSA OOS Deadline

The specified deadline set by the Commercial Vehicle Safety Alliance for when vehicles must comply with Out-of-Service criteria.

Windshield

The front window of a vehicle, made of laminated glass, designed to protect the occupants from external elements and contribute to the vehicle's aerodynamics.

Propeller Shaft Slip Spline

A design feature in a propeller or drive shaft that allows it to adjust length or compress and extend to accommodate movement or vibration.

5th Wheel Pivot Pins

5th Wheel Pivot Pins are critical components in the coupling mechanism of a tractor-trailer, allowing the fifth wheel plate to pivot as the trailer moves, ensuring smooth turning and maneuverability.