Use the Information for the Question(s) Below

question 74

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 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 $5000 investment in Without stock?

• A) $5000
• B) $0
• C) $2,500
• D) $4,000

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Definitions:

Leadership Behaviour

Actions taken by a leader to influence or guide a group towards achieving its goals.

Initiating Structure

A leadership behavior that organizes and defines what group members should be doing to maximize output.

Leader Satisfaction

The degree to which a leader feels contentment or fulfillment from their role, responsibilities, and the performance of their team.

Job Performance

Job performance entails the effectiveness and efficiency with which an employee fulfills their job duties and responsibilities.