Amazon acquired one of America's largest home security companies, Ring, in February 2018. Amazon (Ring) designs video doorbells and then contracts with third-party suppliers and manufacturers to manufacture the devices. Assume that 2021 estimated earnings before interest payments for the home security division are $100 million, not including the potential for product liability lawsuits from design or manufacturing defects. The probability of a lawsuit is 0.05 (5%), and if a lawsuit occurs, it will cost $50 million. From its $100 million in earnings, Amazon (Ring) expects to pay $60 million on its interest and principal payments, leaving $40 million for shareholders as long as the company does not lose a product liability suit. [Ignore any potential support coming from Amazon for the following situations.] 1. What is the expected value of loss associated with the product liability lawsuit? 2. Imagine Amazon operates in a perfect market without transaction costs (taxes are among potential transaction costs). Assume that Amazon does not benefit from insurer services. What is the most Amazon's shareholders want the company to pay for $50 million product liability insurance? 3. Would an insurer be willing to provide the policy for the price Amazon should be willing to pay? Why or why not