According to MM Proposition I, the stock price for Firm X is closest to ________
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 1 million shares outstanding that trade for a price of $24 per share. Firm X has 2 million shares outstanding and $12 million in debt at an interest rate of 5%.
A) $8.00
B) $24.00
C) $6.00
D) $12.00
Answer: C
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