Use the Information for the Question(s) Below

question 102

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 except for the existence of corporate taxes.Your firm pays 40% of earnings in taxes and you decide to issue $25 million in new debt and $25 million in new equity.You ownership stake in the firm following these new issues of debt and equity is closest to:

• A) 58%
• B) 55%
• C) 33%
• D) 50%

Identify and differentiate between formal and natural concepts.

Comprehend the use and impact of prototypes in categorization.

Grasp the psychological processes involved in acquiring, retaining, and using knowledge.

Recognize the cognitive abilities involved in thinking, problem-solving, and language use.

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Definitions:

Cognitive Appraisal

The process by which an individual evaluates and interprets an event or situation that leads to an emotional response.

Different Responses

Variability in reactions or answers by individuals to the same stimulus or situation.

Richard Lazarus

A psychologist known for his work on stress and coping, emphasizing the role of cognitive processes in response to external stressors.

Sympathetic Nervous System

The part of the autonomic nervous system that prepares the body for action by accelerating heartbeat and increasing blood pressure.