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Consider two firms, Firm L and Firm U, that have identical assets that generate identical cash flows. Firm U is an all- equity firm, with

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Consider two firms, Firm L and Firm U, that have identical assets that generate identical cash flows. Firm U is an all- equity firm, with 1 million shares outstanding that trade for a price of $23 per share. Firm L has 2 million shares outstanding and $12 million in debt at an interest rate of 5%. Assume that Modigliani and Miller's (1958) perfect capital markets conditions are met and that you can borrow and lend at the same 5% rate as Firm L. You have $5,000 of your own money to invest and you plan on buying Firm U stock. Using homemade leverage, you borrow enough in your margin account so that the payoff of your margin purchase of Firm Ustock will be the same as a $5,000 investment in Firm stock. What is the number of shares of Firm Ustock you purchased

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