Use the Information for the Question(s) Below

question 85

Multiple Choice

Use the information for the question(s) below.
Consider two firms, Firm X and Firm Y, that have identical assets that generate identical cash flows. Firm Y is an all-equity firm, with 1 million shares outstanding that trade for a price of $24 per share. Firm X has 2 million shares outstanding and $12 million in debt at an interest rate of 5%.
-According to MM Proposition I, the stock price for Firm X is closest to ________.

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

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Definitions:

Decibels

A unit of measurement that represents the intensity of sound, quantifying sound pressure level commonly used in acoustics.

Olfaction

The sense of smell, which is the detection and identification of chemicals by the sensory cells in the nose.

Thalamus

A major part of the brain serving as a hub for transmitting messages between the sensory organs and the cerebral cortex.

Kinesthetic Sense

The sense that detects bodily position, weight, or movement of the muscles, tendons, and joints, enabling physical coordination.