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(2 marks) The market value of Moondustries' assets will be $183 million, $233 million, or $283 million next year if Moondustries' managers operate this firm

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(2 marks) The market value of Moondustries' assets will be \$183 million, \$233 million, or \$283 million next year if Moondustries' managers operate this firm effectively. Each outcome has the same probability. However Moondustries' managers may decide to engage in wasteful empire-building, which will reduce Moondustries' market value by $17 million in all cases. Moondustries' managers may also increase the risk of the firm, which will change the probability of each outcome to 175. 36% and 475 , respectively. The managers at Moondustries will engage in empire building unless that behavior increases the likelihood of bankruptcy. They will choose the ritk of the fim to maximize the expected payoff to equity holders. If Moondustrics has 3203 milion in debt due in one year, then the expected Yalue of Moondustries' assets is closest to: a. $233.89 million b. $258.63 million c. $231.00 miltion d. $248.00 million

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