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

question 47

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.

-The expected return for Nielson Motors stock without leverage is closest to:

• A)-25.0%.
• B)-17.5%.
• C)-12.5%.
• D)12.5%.

---

Definitions:

Marginal Revenue Product

The extra income produced by using an additional unit of a production input, like labor or capital.

Total Revenues

The overall amount of income generated by a business from all its activities, indicating the sales performance over a certain period.

Wayne's Jacket Shop

A hypothetical or specific retail business specialized in selling jackets.

Imperfectly Competitive Market

A market structure where all firms have some control over the prices because the products are differentiated and there are few participants.