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.

---

Definitions:

Uninvolved Pattern

A parenting or relationship style characterized by a lack of responsiveness and emotional warmth towards others.

Strange Situation

A standardized procedure devised by Mary Ainsworth in the 1970s to observe attachment relationships between a caregiver and child.

Ainsworth

An American-Canadian developmental psychologist known for her work in the development of attachment theory, famously through the "Strange Situation" assessment, which identifies patterns of attachment in young children.

Attachment

The strong, enduring, emotional bond between a child and its caregivers that some psychologists consider the basis for relationships later in life.