6 Take a Test Saige Anderson x 6 > C' ' 0 Secure l https://www.mathxl.com/Student/PlayerTest.aspx?testld=176981062¢erwin=yes ' 6 W- o FIL 240-004 SP18 Saige Anderson S | 4/20/18 9:07 AM pter 13 QUiZ SubmitQuiz Consider a simple rm that has the following market-value balance sheet: Assets Liabilities & Equity $1,010 Debt $420 Equity 590 Next year, there are two possible values for its assets, each equally likely: $1,180 and $970. Its debt will be due with 4.9% interest. Because all of the cash flows from the assets must go either to the debt or the equity, if you hold a portfolio of the debt and equity in the same proportions as the tirm's capital structure, your portfolio should earn exactly the expected return on the rm's assets. Show that a portfolio invested 42% in the tirm's debt and 58% in its equity will have the same expected return as the assets of the rm. That is, show that the rm's WACC is the same as the expected retum on its assets. If the assets will be worth $1,180 in one year, the expected return on assets will be %. (Round to one decimal place.) If the assets will be worth $970 in one year, the expected return on assets will be EI%. (Round to one decimal place.) The expected return on assets will be 1%. (Round to one decimal place.) For a portfolio of 42% debt and 58% equity, the expected return on the debt will be %. (Round to one decimal place.) If the equity will be worth $739.42 in one year, the expected return on equity will be |:l%. (Round to one decimal place.) If the equity will be worth $529.42 in one year, the expected return on equity will be |:]%. (Round to one decimal place.) The expected return on equity will be :|%. (Round to one decimal place.) The expected ore-tax return on a portfolio of 42% debt and 58% equity will be %. (Round to one decimal place. There may be a slight difference due to rounding.) Enter your answer in each of the answer boxes. Save for Later ' }