Use the Following Information to Answer the Question(s) Below

question 62

Multiple Choice

Use the following information to answer the question(s) below.

Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielson's assets is $400 million.

-Suppose the risk-free interest rate is 4%.If Nielson borrows $150 million today at this rate and uses the proceeds to pay an immediate cash dividend,then according to MM,the expected return of Nielson's stock just after the dividend is paid would be closest to:

• A)-17.5%.
• B)-12.5%.
• C)12.5%.
• D)17.5%.

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Definitions:

Sale of Goods Act

A UK law enacted in 1979 which regulates the sale of goods that are bought and sold in the UK and the contractual rights and obligations of buyers and sellers.

Contractual Terms

The specific provisions, requirements, and clauses that are agreed upon by the parties forming the binding agreement of a contract.

Sale of Goods Act

A set of laws regulating the sale of goods that ensures rights, responsibilities, and protections for both buyer and seller.

Federal Legislation

Laws enacted by the national government of a country that apply to all individuals and entities within that country's jurisdiction.