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Consider two firms, With and Without, that have identical assets that generate identical cash flows. Without is an all-equity firm, with 1 million shares outstanding that trade for a price of $24 per share. With has 2 million shares outstanding and $12 million dollars in debt at an interest rate of 5%.
-Assume that MM's perfect capital markets conditions are met and that you can borrow and lend at the same 5% rate as with.You have $5000 of your own money to invest and you plan on buying With stock.Using homemade (un)leverage you invest enough at the risk-free rate so that the payoff of your account will be the same as a $5000 investment in Without stock? The number of shares of With stock you purchased is closest to:

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B) Under MM I, the total value of With and Without must be the same.
Value(Without) = 1,000,000 × $24 = $24 million
Value(levered equity) = value(With) - debt = $24 M - $12M = $12 M
Price per share = 11ea7e60_15d0_63b4_ba34_e5b7c8ee8c01_TB1624_11 = $6.00
So the leverage ratio of with is 50% equity to 50% debt. To duplicate this in homemade leverage we need to have equal proportions in out portfolio, this means we need 50% equity and 50% fin the risk free asset. So $5000 is our total portfolio we need $2500 in equity (With stock) and $2500 in the risk free asset. 11ea7e60_15d0_63b5_ba34_49ba1c67aea1_TB1624_11 = 417 shares

Use the Information for the Question(s) Below