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Consider two firms, Firm Land Firm U, that have identical assets that generate identical cash flows. Firm Uis an all-equity firm, with 1 million shares

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Consider two firms, Firm Land Firm U, that have identical assets that generate identical cash flows. Firm Uis an all-equity firm, with 1 million shares outstanding that trade for a price of $25 per share. Firm 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 rate as Firm L. You have $5.000 of your own money to Invest and you plan on buying Firm Ustock. Using homemade leverage, you borrow enough in your margin account so that the payoff of your margin purchase of Form Ustock will be the same as a $5,000 investment in Firm L stock. The number of shares of Firm Ustock you purchased is dosest to Select one O a 200 Ob 20 De 400 Od. 1538 Consider two firms, Firm Land Firm U, that have identical assets that generate identical cash flows. Firm Uis an all-equity firm, with 1 million shares outstanding that trade for a price of $25 per share. Firm 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 rate as Firm L. You have $5.000 of your own money to Invest and you plan on buying Firm Ustock. Using homemade leverage, you borrow enough in your margin account so that the payoff of your margin purchase of Form Ustock will be the same as a $5,000 investment in Firm L stock. The number of shares of Firm Ustock you purchased is dosest to Select one O a 200 Ob 20 De 400 Od. 1538

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