Question
can you help me with this question i solved part A and B but i don't know how do part C Wolfrum Technology(WT) has no
can you help me with this question i solved part A and B but i don't know how do part C
Wolfrum Technology(WT) has no debt. Its assets will be worth $429 million one year from now if the economy isstrong, but only $252 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $269 million.
a. What is the expected return of WT stock withoutleverage?
b. Suppose therisk-free interest rate is 5%. If WT borrows $138 million today at this rate and uses the proceeds to pay an immediate cashdividend, what will be the market value of its equity just after the dividend ispaid, according toMM?
c. What is the expected return of WT stock after the dividend is paid in part (b)?
a. The unlevered expected return of WT stock is 26.58%. (Round to two decimalplaces.)
b. The market value ofWT's equity is $131 million. (Round to the nearestinteger.)
c. The expected return of WT stock is ..............%. (Round to two decimalplaces.)??????
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