Question
Zymase is a biotechnology startup firm. Researchers at Zymase must choose one of three different research strategies. The payoffs (after-tax) and their likelihood for each
Zymase is a biotechnology startup firm. Researchers at Zymase must choose one of three different research strategies. The payoffs (after-tax) and their likelihood for each strategy are shown below. The risk of each project is diversifiable.
a. Which project has the highest expected payoff?
b. Suppose Zymase has debt of $35 million due at the time of the project’s payoff. Which project has the highest expected payoff for equity holders?
c. Suppose Zymase has debt of $130 million due at the time of the project’s payoff. Which project has the highest expected payoff for equity holders?
Strategy Probability Payoff (in $ million) A 100% 90 B 50% 160 50% C 10% 370 90% 20
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a PROJECT A 90 million PROJECT B 05 x 16080 million PROJECT C01x37009x2055 million theref...Get Instant Access to Expert-Tailored Solutions
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