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:

Damages

Financial compensation that is ordered to be paid as a remedy for loss or injury.

Plaintiff

The party initiating a lawsuit, alleging harm caused by the defendant and seeking legal remedy.

Defendant

The individual or group that the legal action is brought against in a court setting.

Damages

Financial compensation awarded by a court to indemnify a harmed party for loss or injury resulting from a breach of contract or wrongdoing.