You are considering a leveraged buyout of corporation X. The stock X is worth either $1/ share or $5 / share. The management of the company knows what it is worth, and is asking $2/share for the 10 thousand shares outstanding. All you know is that the probability that the share is worth $5/ share is 50%. Should you buy the company at this price? It costs the management $50,000 to cook the books if it has to make the company look better than it really is.