Firm M's earnings and stock price tend to move up and down with other firms in the S&P 500, while Firm W's earnings and stock price move counter cyclically with M and other S&P companies. Both M and W estimate their costs of equity using the CAPM, they have identical market values, their standard deviations of returns are identical, and they both finance only with common equity. Which of the following statements is CORRECT?
a. M and W should have identical WACCs because their risks as measured by the standard deviation of returns are identical.
b. M should have the lower WACC because it is like most other companies, and investors like that fact.
c. If M and W merge, then the merged firm MW should have a WACC that is a simple average of M's and W's WACCs.
d. Without additional information, it is impossible to predict what the merged firm's WACC would be if M and W merged.
e. Since M and W move counter cyclically to one another, if they merged, the merged firm's WACC would be less than the simple average of the two firms' WACCs.
please give me why
1. What need is the highest level of personal motivation? How many people reach this level? Is it ever fully satisfied or fulfilledApr 25 2021
Deforestation ________.a. increases mineral runoff from soilb. decreases local temperaturec. increases local rainfalld. all of the aboveJul 04 2021
In its most recent financial statements, Nessler Inc. reported $75 million of net income and $825 million of retained earnings. The previous retained earnings were $784 m...Apr 24 2021
In this assignment, you are to implement a console application for the management of a premiership table for an Australian Rules football league that conforms to the clas...Jul 06 2020
Find the positive root of x-cosx =0 by regular falsi method >Aug 04 2020
Prairie Corporation is a primary beneficiary for Vintage Company, a variable interest entity. When Prairie obtained financial control over Vintage, any excess fair value ...Jul 20 2021
On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use t...Jul 14 2021
A fraction p = 0.05 of the items coming off of a production process are defective. The output of the process is sampled, one by one, in a random manner. What is the proba...Aug 04 2020
Packages are thrown down an incline at A with a velocity of 4ft/s. The packages slide along the surface ABC to a conveyer beltwhich moves with a velocity of 8ft/s. Knowin...Jun 04 2020
When a diprotic acid, H2A, is titrated with NaOH, the protons on the diprotic acid are generally removed one at a time, resulting in a pH curve that has the following gen...Jul 23 2021