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:

Popular Support

Widespread approval or favor from the general public towards an idea, person, or policy.

Nomination Process

The method by which political parties select and approve candidates for elected office in a democratic system.

Party Elites

High-ranking members within a political party who have considerable influence over party operations, decision-making, and policy direction.

Jeffersonian Republicans

A political philosophy and movement in the early United States advocating for states' rights and a limited federal government, opposed to the Federalist Party.