Business, 16.08.2021 21:40 fredvales19

Acort Industries owns assets that will have a 75% probability of having a market value of $52 million in one year. There is a 25% chance that the assets will be worth only $22 million. The current risk-free rate is 5%, and Acort's assets have a cost of capital of 10%. a. If Acort is unlevered, what is the current market value of its equity?
b. Suppose instead that Acort has debt with a face value of $26 million due in one year. According to MM, what is the value of Acort's equity in this case?
c. What is the expected return of Acort's equity without leverage? What is the expected return of Acort's equity with leverage?
d. What is the lowest possible realized return of Acort's equity with and without leverage?

Answers: 2

Show answers

Another question on Business

Business, 21.06.2019 18:20

The sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. the actual price level turns out to be 110. faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. sales from catalogs will

Answers: 3

Answer

Business, 21.06.2019 20:30

1. gdp is calculated by summing consumption, investment, and exports of all final goods and services produced within the borders of a given country during a specific period the dollar value of all final goods and services produced within the borders of a given country during a specific period government expenditures within the borders of a given country during a specific period the quantity of all final goods and services produced within the borders of a given country during a specific period

Answers: 3

Answer

Business, 21.06.2019 22:50

The leading producer of cell phone backup batteries, jumpstart, has achieved great success because they produce high-quality battery backups that are not too expensive. even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as jumpstart. also, in general, the price of backup batteries has declined because of economies of scale and learning. in addition, jumpstart has added complementary assets, such as a carrying case. considering all of these factors, the backup battery industry is most likely in the introduction stage. growth stage. shakeout stage. maturity stage.

Answers: 2

Answer

Business, 22.06.2019 15:10

Paying attention to the purpose of her speech, which questions can she eliminate? a. 1 and 2 b. 3 c. 2 and 4 d. 1-4

Answers: 2

Answer

You know the right answer?

Acort Industries owns assets that will have a 75% probability of having a market value of $52 millio...

Questions