Use the Information for the Question(s)below

question 45

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 overall expected payoff under JR's new riskier business strategy?

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

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Definitions:

Customer Orientation

A business strategy that focuses on creating a positive experience for customers by understanding and meeting their needs.

Ownership Utility

The value that comes from a product's ability to satisfy ownership rights, including the use, control, and transfer of the product.

Time Utility

The increase in the value of a product or service by making it available at a convenient time for the consumer.

Place Utility

The value added to products or services by making them more accessible or available to potential users or consumers.