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

question 65

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 market value of its equity just after the dividend is paid would be closest to:

• A)$0 million.
• B)$150 million.
• C)$250 million.
• D)$400 million.

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Definitions:

Trout

A common freshwater fish found in clear, cold waters, known for its importance in angling and aquaculture.

Categorical Syllogism

A form of argument consisting of three propositions: a major premise, a minor premise, and a conclusion, which logically deduct from the premises.

Mood

In grammar, the quality of a verb that conveys the writer's attitude toward the action or state.

Letters

Symbols in an alphabet used to represent sounds or phonemes in written language, serving as the fundamental units of writing systems.