Use the Following Information to Answer the Question(s)below

question 95

Multiple Choice

Use the following information to answer the question(s) below.
If managed effectively,Rearden Metal will have assets with a market value of $200 million,$300 million,or $400 million next year,with each outcome being equally likely.Managers,however,may decide to engage in wasteful empire building,which will reduce Rearden's market value by $20 million in all cases.Managers may also increase the risk of the firm,changing the probability of each outcome to 50%,5%,and 45% respectively.
-Suppose that the managers at Rearden Metal will increase risk to maximize the expected payoff to equity holders.If Rearden has $180 million in debt due in one year,then the expected value of Rearden's assets is closest to:

• A)$280 million.
• B)$295 million.
• C)$300 million.
• D)$900 million.

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Definitions:

Nuclear Membrane

The lipid bilayer membrane which encloses the nucleus, separating its contents from the cytoplasm and regulating molecule passage.

Ribosomes

The cellular structures responsible for protein synthesis, found floating freely within the cytoplasm or attached to the endoplasmic reticulum.

Cellular Respiration

The metabolic process by which cells produce energy in the form of ATP from glucose, involving various biochemical pathways including glycolysis and the Krebs cycle.

Ribosomal RNA

A type of RNA that combines with proteins to form ribosomes, which are the cellular structures that assemble proteins according to genetic instructions.