Nuclear Widgets Has a Current Cost of Levered Equity Equal

question 81

Multiple Choice

Nuclear Widgets has a current cost of levered equity equal to 13%.Its return on assets is 12% and its cost of debt is 8%.Nuclear Widgets has borrowed a total of $5,000,000.What is the current value of Nuclear Widgets' equity? Ignore the effect of taxes.

• A) $1,250,000
• B) $20,000,000
• C) the problem yields a negative number which means the problem is not realistic
• D) not enough information is given

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Definitions:

Formerly Enslaved

Individuals who were once subject to slavery but have since been emancipated or released from bondage.

Sea Islands Experiment

An early Reconstruction initiative in the 1860s aimed at redistributing land on the Sea Islands off the coast of South Carolina to newly freed slaves.

Ten-Percent Plan

A Reconstruction plan proposed by President Abraham Lincoln in 1863, suggesting that a Southern state could be readmitted into the Union once 10% of its voters swore an oath of allegiance to the Union.

Reconstruction

The period after the American Civil War (1865–1877) during which the United States attempted to reintegrate the Confederate states back into the Union and rebuild the South.