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Monitor the firm investment decision

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Reference no: EM131388022

Suppose that you can monitor the firms' investment decision and prevent the firm from investing in a project that is too risky. The monitoring costs $50M. You can borrow the $50M at a 10% interest rate and repay the loan plus interest in one year. If you monitor the firm, what is your total expected payoff (bond - loan repayment) in one year?

Reference no: EM131388022

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