Biggest incentive not to proceed with the decision

Assignment Help Business Management
Reference no: EM131640493

Ralston Enterprises has assets that will have a market value in one year as follows:

Probability

2%

6%

25%

34%

25%

6%

2%

Value (in $ million)

70

80

90

100

110

120

130

That is, there is a 2% chance the assets will be worth $70 million, a 6% chance the assets will be worth $80 million, and so on. Suppose the CEO is contemplating a decision that will benefit her personally but will reduce the value of the firm's assets by $10 million. The CEO is likely to proceed with this decision unless it substantially increases the firm's risk of bankruptcy.

a. If Ralston has debt due of $75 million in one year, the CEO's decision will increase the probability of bankruptcy by what percentage?

b. What level of debt provides the CEO with the biggest incentive not to proceed with the decision?

Reference no: EM131640493

Questions Cloud

What is the maximum price : What is the maximum price you would pay for the share today if you wanted to earn a 12.48% p.a. return?
What are the characteristics of a virtual organization : What are the characteristics of a virtual organization? Using examples, explain how e-commerce can support the virtual organization.
Past performance and commitment and trust relationships : How might a framework of: reputations based on past performance and commitment and trust relationships allow for a more ethical dimension to your professional?
What is the given situation in your neighbourhood : What is the situation in your neighbourhood? Is it a habit of superiors to take decisions on their own or do they prefer consult their subordinates?
Biggest incentive not to proceed with the decision : What level of debt provides the CEO with the biggest incentive not to proceed with the decision?
Explain delivering the highest quality care : Discuss some of the information you would include on this tool and how you would proceed with this project
What are the advantages and disadvantages of each option : A company has offered you a $5000 bonus which you may receive today or 100 shares of company's stock, which has a current stock price of $50 per share.
List factors that can impede therapeutic communications : List factors that can impede therapeutic communications with patients and include how you as the medical assistant will resolve these communication issues.
What is the present value of these acquired tax loss : If Fargo Bank is expected to generate taxable income of $14 billion per year in the? future, and its tax rate is 30%?, what is the present value.

Reviews

Write a Review

Business Management Questions & Answers

  Own price elasticity of good

The demand for good X has been estimated to be ln Qxd = 100 - 4.2 ln PX + 5.5 ln PY + ln M. The own price elasticity of good X is:

  Explain sketch the operation of a pull system for running

Explain Sketch the operation of a pull system for running Quality Parts Company's current system and Outline a plan for introducing lean at Quality Parts Company.

  Economic health of a community

How does the economic health of a community impact the budget forecasting for an EMS organization?

  Large effect on the equilibrium quantity

In Market B, the same tax will have only a small effect on the price consumers pay, but it will have a large effect on the equilibrium quantity. Other factors are held constant. In which market will the tax have a smaller deadweight loss?

  Complex problemswheatley proposes five stages to solving

complex problemswheatley proposes five stages to solving complex problems. from a managerial perspective reflect upon a

  International management-management across borders

The week six assignment is to complete and discuss the case study: "Expatriate Management at AstraZeneca" (page 325) Deresky, H (2013). International Management, Management Across Borders. 8th ed. Upper Saddle River, NJ: Pearson

  How does wolterstorff find joy after his loss

How does Wolterstorff find joy after his loss? What is the meaning and significance of death in light of the Christian narrative?

  Staffing an organizationquestion would it be desirable to

staffing an organizationquestion would it be desirable to hire people only according to the personorganization match

  Important that prices are flexible in our economy

Explain why it is important that prices are flexible in our economy? What are the implications if the government started to control prices for products, how would this influence buying?

  Find or recall and define the culture

Based on information obtained at GE's web site, anecdotal information, and personal experience - Describe the artifacts you find or recall that define the culture.

  Case study dave armstrongdave armstrong is the disguised

case study dave armstrongdave armstrong is the disguised name of the 29-year old second year mba student who wrote this

  What is the social cost of a monopoly

An upscale bistro in a small town charges higher prices for the same menu items at dinner time than at lunch time. Does the bistro necessarily practice price discrimination? Explain your answer.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd