Question
Company has 50 000 stocks. Each stock has a market price of 3 dollars and an expected return of 10%. Company has a debt with
Company has 50 000 stocks. Each stock has a market price of 3 dollars and an expected return of 10%. Company has a debt with a market value of 150 000 dollars. The risk-free rate is 4%.
Then: Stock prices fall 50%, but debt stays at same market value. What happens to the expected return of the stock?
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The expected return of the stock would increase Initially with 50000 stocks priced at 3 each the tot...
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Financial Management Theory and Practice
Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason
2nd Canadian edition
176517308, 978-0176517304
