f it is managed efficiently, Remel, Inc., will have assets with a market value of $51.7 million, $101.5 million, or $150.4 million next year, with each outcome being equally likely. However, managers may engage in wasteful empire building, which will reduce the market value by $5.2 million changing the probability of each outcome to 48%, 13%, and 39%, respectively. a. What all cases. Managers may also increase the risk of the firm the expected value of Remel's assets if it is run efficiently? Suppose managers will engage in empire building unless that behavior increases the likelihood of bankruptcy. They will choose the risk of the firm to maximize the expected payoff to equity holders. b. Suppose Remel has debt due in one year as shown below. For each case, indicate whether managers will engage in empire building, and whether they will increase risk. What is the expected value of Remel's assets in each case? $40.2 million, ii. $51.3 million, i. $93.4 million, iv. $97.8 million. c. Suppose the tax savings from the debt, after including investor taxes, savings, will be paid out to shareholders immediately as a dividend when the debt is issued. What is the expected value of Remel's assets, including the tax savings, for each debt level in part (b)? Which debt level in part (b) is optimal for Remel? equal to 9% of the expected payoff of the debt. The proceeds from the debt, as well as the value of any tax