Zybeck Corp

question 76

Multiple Choice

Zybeck Corp. projects operating income of $4 million next year. The firm's income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock at $10 per share. If Zybeck issues common stock this year, what will the firm's return on equity be next year?

• A) 16.7%
• B) 18.2%
• C) 22.1%
• D) 26.4%
• E) 29.6%

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Definitions:

Psychological Problem

An issue or condition impacting mental health or wellbeing, often requiring professional diagnosis and treatment.

Medical Model

An approach to understanding and treating mental disorders by focusing on biological and physiological explanations and treatments.

Anatomical Deviation

A variation from the normal anatomical structure or position, which may be congenital or acquired.

Unconscious Causes

Factors that influence behavior and decisions without the individual's awareness.