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Consider two firms, U and L, that have identical assets that generate identical cash flows....

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Finance

Consider two firms, U and L, that have identical assets that generate identical cash flows. U is an all-equity firm, with 1,000,000 shares outstanding that trades for a price of $24 per share. L has 2,000,000 shares outstanding and $12,000,000 dollars in debt at an interest rate of 5.00%. They operate in a country with no tax. According to MM Proposition 1, the stock price for L is closest to:

Group of answer choices

$5.00

$7.00

$6.00

$6.50

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