Question: wolfram technology (WT) has not debt. Its assets will be worth $440 million on year from now if the economy is strong, but only $234
wolfram technology (WT) has not debt. Its assets will be worth $440 million on year from now if the economy is strong, but only $234 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $263 million. a. what is the expected return of WT stock without leverage? b. Suppose the risk-free interest rate is 5%. If WT borrows $92 million today at this rate and uses the proceeds to pay an immediate cash dividend, what will be the market value of its equity just after the dividend is paid, according to MM? c. what is the expected return of WT stock after the dividend is paid in part (b)
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