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:

Defence Mechanisms

Psychological strategies employed unconsciously to protect a person from anxiety-arising thoughts or feelings.

Libidinal Desires

Refers to the psychic drive or energy associated with sexual instinct and desires in psychoanalytic theory.

Ego Employed

The utilization of one's self-importance, self-esteem, or identity in navigating or influencing social or psychological scenarios.

Freud

Refers to Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.