Suppose That USB Corp Has $100m Invested in 8% Risk-Free

question 37

Multiple Choice

Suppose that USB Corp has $100m invested in 8% risk-free bonds that mature in one-year. The company also has $80m in debt outstanding that will also mature in a year. USB shareholders are considering selling the $100m in debt and investing in a project that has a 60% chance of returning $200m and a 40% chance of returning $2m. Agency costs: Given the pay-offs of the project, what does the per cent chance of success need to be in order for the expected value of equity with the project to be equal to the expected value of equity without the project?

• A) 1/3
• B) 1/4
• C) 1/5
• D) 1/6

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Definitions:

Workforce Composition

The demographic makeup of employees in an organization, including diversity in gender, ethnicity, age, and other factors.

Americans with Disabilities Act

A civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public.

Major Life Activity

Major life activity refers to actions considered essential for daily living, such as walking, eating, and sleeping, often discussed in the context of disability rights.

Disparate Treatment

Unequal behavior towards an individual or group based on protected characteristics, leading to discrimination.