A Firm Is Analyzing Two Possible Capital Structures-30 and 50

question 170

Multiple Choice

A firm is analyzing two possible capital structures-30 and 50 percent debt ratios. The firm has total assets of $5,000,000 and common stock valued at $50 per share. The firm has a marginal tax rate of 40 percent on ordinary income. The number of common shares outstanding for each of the capital structures would be ________.

• A) 30 percent debt ratio: 30,000 shares and 50 percent debt ratio: 50,000 shares
• B) 30 percent debt ratio: 50,000 shares and 50 percent debt ratio: 70,000 shares
• C) 30 percent debt ratio: 70,000 shares and 50 percent debt ratio: 100,000 shares
• D) 30 percent debt ratio: 70,000 shares and 50 percent debt ratio: 50,000 shares

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Definitions:

Priming Task

A technique in psychology used to train or influence participants' responses towards a subsequent task, by exposing them to specific stimuli beforehand.

Metaphor Priming Procedure

This is a cognitive method used in psychological research to influence how individuals process information, by subtly introducing metaphors that can shape thinking and responses.

Explicit Attitudes

Attitudes that are consciously recognized and expressed by individuals, often through verbalization.

Implicit Attitudes

Unconscious beliefs or feelings towards objects, people, or situations, which can influence behavior and understanding without conscious awareness.