Acceptance of high-risk project

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You are the manager of a financially distressed company with $3.1 million in debt outstanding that will mature in three months. Your company currently has $3 million invested in risk-free Australian Government Treasury bills that will pay $3.1 million in three months.

Assume that you are offered with an opportunity that involves selling the $3 million risk-free Treasury bills now and investing the proceed in a high-risk project, with a 30% probability of $6 million pay off in three months, and a 70% probability of $1 million pay off in three months. If you were operating the company in the shareholders' best interests, will you push for the acceptance of this high-risk project? Explain your reasoning.

Reference no: EM133067824

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