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Consider a company that will have total assets with market value of $ 2 0 million, $ 6 5 million, or $ 1 4 0

Consider a company that will have total assets with market value of $20 million, $65 million, or $140 next year, with each outcome being equally likely, if the company is managed efficiently. However, as managers are currently engaged in wasteful spending (that is empire building), the market value is $7 million lower in all cases. Additionally, because managers are engaged in empire building, their activities have also increased firm risk. This means that the probabilities of the outcomes have changed and they are currently 45%,25%, and 30%, respectively. What is the expected value of the company's assets due to empire building and increased risk?

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