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Nielson Motors (NM) has no debt. The market value today of Nielsonʹs assets is $400 million....

Nielson Motors (NM) has no debt. The market value today of Nielsonʹs assets is $400 million. Suppose the risk‐free interest rate is 4%. If Nielson borrows $150 million today at this rate and uses the proceeds to pay an immediate cash dividend, then according to MM theory, the market value of its equity just after the dividend is paid would be closest to:   

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Answer:

Value of equity is given by the formula as total value - value of debt

Value of equity = $400 Million -$150 Million

Value of equity after the dividends are paid are = 250 Million

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