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What is the expected value of rearden assets

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Reference no: EM132688961

If managed effectively, Rearden Metal will have assets with a market value of $200 million, $300 million, or $400 million next year, with each outcome being equally likely. Managers, however, may decided to engage in wasteful empire building, which will reduce Rearden's market value by $20 million in all cases. Managers may also increase the risk of the firm, changing the probability of each outcome to 50%, 5%, and 45% respectively.

What is the expected value of Rearden's assets if it were run efficiently? Calculation steps?

Reference no: EM132688961

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