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Recapitalize enough to avoid bankruptcy by selling new shar

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Chase bank has about $2 Trillion in assets. Suppose Wells has $1.9 Trillion in liabilities, and they all mature next year when the assets will be worth either $1.8 Trillion or $2.2 Trillion, each with probability ½, so there's a ½ chance that Wells is insolvent by $0.1 Trillion. Is it in the interest of Wells' shareholders to recapitalize enough to avoid bankruptcy by selling new shares worth $0.1 Trillion? Explain.

Reference no: EM133227519

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