Question $3$

$\frac{0}{1}pts$

Assume perfect capital markets. Consider two firms, Firm X and Firm Y$,$ that have identical assets that generate identical cash flows. Firm $Y$ is an all$-$equity firm, with $2$ million shares outstanding that trade for a price of $$28$ per share. Firm $x$ has $2$ million shares outstanding and $$24$ million in debt at an interest rate of $5\%.$ According to MM Proposition I, the stock price for Firm X is closest to $($Hint: Find the value of equity of the levered firm and divide by the number of shares$)$

$$8\mathrm{.}00$

$$6\mathrm{.}00$

$$24\mathrm{.}00$

$$12\mathrm{.}00$

$$18\mathrm{.}00$