You are considering a stock investment in one of two firms (NoEquity, Inc, and NoDebt, Inc), both of which operate in the same industry and have identical operating income of $255 milion. NoEquity, Inc.., finances its $50 million in assets with $49 milion in debt (on which it pays 10 percent interest annualy) and $1 million in equity. NoDebt, Inc., finances its $50 million in assets with no debt and $50 million in equity Both firms pay a tax rate of 30 percent on ther taxable income Colculate the net income and return on assets for the two firms (Enter your doller answers in millions of dollars. Round all answers to 2 decimal pleces.) NoEquity $0 NoDebt m Net income Return on assets

You are considering a stock investment in one of two firms (NoEquity, Inc, and NoDebt, Inc), both of which operate in the same industry and have identical operating income of $255 milion. NoEquity, Inc.., finances its $50 million in assets with $49 milion in debt (on which it pays 10 percent interest annualy) and $1 million in equity. NoDebt, Inc., finances its $50 million in assets with no debt and $50 million in equity Both firms pay a tax rate of 30 percent on ther taxable income Colculate the net income and return on assets for the two firms (Enter your doller answers in millions of dollars. Round all answers to 2 decimal pleces.) NoEquity $0 NoDebt m Net income Return on assets

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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MNO Oil has assets with a market value of $600 million, $64 million of which are cash. It has debt of $250 million, and 20 million shares outstanding. Assume perfect capital markets. If MNO Oil distributes the $64 million as a dividend, then its stock price after the dividend will be closest to:
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