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:

Lethal Genetic Defect

A genetic mutation that is directly responsible for causing death, often before birth.

Genetic Imprinting

A process by which certain genes are expressed in a parent-of-origin-specific manner.

Turner's Syndrome

A genetic disorder affecting females, characterized by the partial or complete absence of one of the X chromosomes, leading to various developmental and medical challenges.

Sex-linked

Referring to traits or disorders that are determined by genes located on the sex chromosomes, often resulting in differing patterns of inheritance in males and females.