Health and Wealth Company Is Financed Entirely by Common Stock

question 75

Multiple Choice

Health and Wealth Company is financed entirely by common stock that is priced to offer a 15 percent expected return.If the company repurchases 25 percent of the common stock and substitutes an equal value of debt yielding 6 percent, what is the expected return on the common stock after refinancing? (Ignore taxes.)

• A)18 percent
• B)21 percent
• C)15 percent
• D)10.5 percent

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Definitions:

Mitotic Spindle

A structure composed of microtubules, which segregates chromosomes into the daughter cells during mitosis.

Telomere

Region of noncoding DNA at the end of a chromosome; provides a buffer against loss of coding sequences.

Duplicated Chromosome

A chromosome that has undergone replication resulting in two identical copies joined together, important for cell division.

Chromatid

A chromatid is one of two identical halves of a replicated chromosome, which are joined at their centromeres, before being separated during cell division.