1. Chipotle and Bullritos are identical companies. They are both restaurants that serve the same product to the same clientele in the fast-casual burrito market. Further suppose that they generate identical cash flows and have identical assets. The only difference is that Bullritos is financed entirely with equity, with 12 million shares outstanding and each share trading at $27. Chipotle, on the other hand, has 16 million equity shares outstanding but also has $31 million worth of debt paying an annual interest rate of 15%. According to MM Proposition I, the stock price for Chipotle is closest to _______________.

   		$20.25
   		$27.00
   		$21.18 Points:1
   		$18.31