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You are the CFO of a publicly-listed gaming company. As such, you have access to information that the public does not. Your company has no

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You are the CFO of a publicly-listed gaming company. As such, you have access to information that the public does not. Your company has no debt and therefore faces no risk of default. Your main concern is that if share price falls below $30 USD per share that your stock options will be worthless. The company announced a new game that would produce perpetual revenues of either $100M per year if or $160M per year. The public believes that the probability of high revenues is 60 percent. The perpetual operating costs will be $20M per year and grow by 3 percent per year. The project has an upfront cost of $150M. Assume that the discount rate for all cash flows in 12 percent. There are no other lines of business and the company has 25M shares outstanding. Suppose that you know that the true probability of high revenues is 50 percent. What could better align your interests with shareholders? Cash compensation, since you would not worry about whether your options are in the money Put options, since you are worried about the stock price falling Nothing, as your current stock options encourage you to maximize shareholder value

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