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Firms X and Y will either make $225 million or lose $72 million every year with equal probability. However, the two firms' profits are perfectly

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Firms X and Y will either make $225 million or lose $72 million every year with equal probability. However, the two firms' profits are perfectly negatively correlated. Assume that the corporate tax rate is 35% and that it is not possible to carry back or carry forward any losses. What are the expected after-tax profits if the two firms are combined into one firm called CD but are run as two independent divisions? a) $74,250,000 b) $37,125,000 Oc) $31,500,000 d) $63,000,000 e) $99,450,000

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