Use the Information for the Question(s)below

question 35

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 one million shares outstanding that trade for a price of $24 per share. With has two million shares outstanding and $12 million in debt at an interest rate of 5%.
-According to MM Proposition I, the stock price for With is closest to:

• A)$24.00
• B)$6.00
• C)$12.00
• D)$8.00

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Definitions:

Consumer Welfare

The overall satisfaction, utility, or benefit that consumers receive from consuming goods and services.

Product Variety

The assortment of different types of goods or services that a company offers.

Coordination Gains

Benefits that arise from individuals or groups working together effectively, particularly in the allocation of resources or in achieving common objectives.

Product Variety

The assortment of different products or services offered by a firm or present in a market.