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

question 65

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 market value of its equity just after the dividend is paid would be closest to:

• A)$0 million.
• B)$150 million.
• C)$250 million.
• D)$400 million.

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Definitions:

M.B.A.

Master of Business Administration, a graduate-level degree focusing on business management, strategy, and leadership.

Formal Report

A structured document that presents information and analyses on specific topics in a professional and systematic manner.

Margin

The edge or border of something, often used in the context of the blank space surrounding the text on a page.

Salutation

A greeting used in communication, often at the beginning of a letter or email, addressing the recipient.