Question: Wolrum Technology (WT) has no debt its assets will be worth $499 million one year from now if the economy is strong. but only $267
Wolrum Technology (WT) has no debt its assets will be worth $499 million one year from now if the economy is strong. but only $267 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $299 million. a. What is the expected retum of WT stock without leverage? b. Suppose the risk-free interest rale is 5%. If WT borrows $67 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 atter the dividend is paid, according to MM? c. What is the expected retum of WT btock after the dividend is paid in part (b)? a. The unlevered expected retum of WT stock is: W. (Round to two decimal places.) b. The market value of WTs equity is $ million. (Round to the nearest integer.) c. The expected return of WT stock is K. (Round to two decimal places.)
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