Wolfrum Technology (WT) has no debt. Its assets will be worth $450 million in one year if

Question:

Wolfrum Technology (WT) has no debt. Its assets will be worth $450 million in one year if the economy is strong, but only $200 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $250 million.
a. What is the of WT stock without leverage?
b. Suppose the risk-free interest rate is 5%. If WT borrows $100 million today at this rate and uses the proceeds to pay an immediate cash what will be the market value of its equity just after the is paid, according to MM?
c. What is the of WT stock after the is paid in part (b)?

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