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Monsters Incorporated (MI) is ready to launch a new product.Depending upon the success of this product,MI will have a value of either $100 million,$150 million,or $191 million,with each outcome being equally likely.The cash flows are unrelated to the state of the economy (i.e.risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate,which is currently 5%.Assume that the capital markets are perfect.
-The initial value of MI's equity without leverage is closest to:
Convertible
A type of car or bond that can be converted into another form, such as a convertible car with a retractable roof or a bond that can be converted into stock.
Population
The entire set of individuals or items that is the subject of study in statistical analysis.
Random Variables
Variables representing numerically measurable outcomes of random events.
Numerical
Pertaining to numbers, often used to describe data or methods that involve the manipulation or analysis of numbers.
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