A firm has 65% probability of being worth $100 million and a 35% probability of being worth $130 million. There is one bond outstanding that promises to pay $100 million at an interest rate of 7%. The cost of capital for the firms projects is 9%. What is the expected return on the levered equity?

Group of answer choices

32.6%

2.5%

2.0%

4.5%

The M&M dividend proposition states that

Group of answer choices

shareholder value is unaffected by a firms dividend policy

a firm should borrow money if necessary to maintain a stable dividend policy

the higher a firms dividends, the greater the firm value

the higher a firms dividends, the greater the shareholder value