Suppose That UBM Corp

question 90

Multiple Choice

Suppose that UBM Corp. has invested $100 million in 8% risk-free bonds that mature in one-year. The firm also has $80 million in debt outstanding that will also mature in a year. UBM stockholders are considering selling the $100 million in debt and investing in a project that has a 60% chance of returning $200 million and a 40% chance of returning $2 million. What is the expected value of the equity if the stockholders sell the debt?

• A) $175 million
• B) $97.5 million
• C) $51 million
• D) $40 million

Understand the principles underlying taxation, including the ability-to-pay and benefits-received principles.

Identify the components and determinants of taxable income.

Recognize the characteristics of progressive, regressive, and proportional tax systems.

Understand how government revenues are generated and how they relate to expenditures in education and defense.

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Definitions:

Skeletal Muscle

A type of muscle tissue that is attached to bones and is involved in the movement of the skeleton and posture maintenance.

Muscular System

The biological system consisting of skeletal, smooth, and cardiac muscles, enabling movement of the body and maintenance of vital functions.

Fascicle

A bundle of skeletal muscle fibers surrounded by connective tissue, forming part of a muscle.

Skeletal Muscle

A variety of muscle tissue connected to the skeletal system, which facilitates the intentional movements of the body.