Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to: A. ‐25.0% B. ‐17.5% C. ‐12.5% D. 12.5%
Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to: A. ‐25.0% B. ‐17.5% C. ‐12.5% D. 12.5%
Chapter31: Capital Markets
Section: Chapter Questions
Problem 3E
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Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to:
A. ‐25.0%
B. ‐17.5%
C. ‐12.5%
D. 12.5%
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