Use the Information for the Question(s)below

question 105

Multiple Choice

Use the information for the question(s) below.
JR Industries has a $20 million loan due at the end of the year and under its current business strategy its assets will have a market value of only $15 million when the loan comes due.JR is considering a new much riskier business strategy.While this new riskier strategy can be implemented using JR's existing assets without any additional investment,the new strategy has only a 40% probability of succeeding.If the new strategy is a success,the market value of JR's assets will be $30 million,but if the strategy fails the assets will be worth only $5 million.
-What is the expected payoff to equity holders under JR's new riskier business strategy?

• A)$15 million
• B)$11 million
• C)$20 million
• D)$4 million

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Definitions:

Division of Labor

The allocation of different tasks to different people or groups in an effort to improve efficiency and productivity.

Worker Boredom

A state of uninterest and lack of engagement that employees may experience due to repetitive tasks or lack of stimulation.

High Employee Turnover

The situation in which an organization or business experiences a rapid and frequent change of staff members.

Information Overload

Occurs when an individual is exposed to more information than they can process or handle, leading to overwhelm or decision-making difficulties.