Question 4 (15 points) Asterix Inc. is a mature company whose management team has a poor track record. There is a possibility that there will be a management turnover to replace the poor performing CEO. You have the following information: - With incumbent management team, the firm will: Generate $50 million in after-tax operating income next year Reinvest $20 million of this after-tax operating income Generate a constant growth of 3% a year in perpetuity - Have a cost of capital of 7% If there is management turnover, this is your expectation under the new management: $50 million in after-tax operating income next year Generate constant growth of 3% a year in perpetuity - Cost of capital: 7% - The return on capital will double from its current level You estimate the probability of a management turnover at 30%. What is the expected value of the operating assets? Note: expected value = value under incumbent management * probability of no turnover + value under new management * probability of management turnover