Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m

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Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m

Wolfrum Technology (WT) has no debt. Its assets will be worth $ million one year from now if the economy is strong, but only $ million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $ million.

a. What is the expected return of WT stock without leverage?

b. Suppose the risk-free interest rate is . If WT borrows $ million today at this rate and uses the proceeds to pay an immediate cash dividend, what will be the market value of its equity just after the dividend is paid, according to MM?

c. What is the expected return of WT stock after the dividend is paid in part

(b)?

college finance

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Answer 1

Answer #1

For the answer to part C look below this picture. also the answer to part C is not 113.4

Part C) [0.50*(204-113.4)+ 0.50*(475-113.4)]-163/163

=63.1/163= 0.3871165644 or Answer for part C) 38.71

answered by: Andrew San Andres

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Answer 2

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Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m

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Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m

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Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m

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Add Answer to: Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m

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Nielson Motors (NM) has no debt. The market value today of Nielsonʹs assets is $400 million....

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Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m