A firm must choose among three alternative ways to compensate its salaried employees. It can pay them at the end of each week, a
1 answer:
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Answer:
The lowest price the target's owners are willing to accept for the firm is 50
Explanation:
Solution
It is known that in the market there are two firms. while one is target, the other is equity firm.
The target has several projects at hand bu the firm's worth is uncertain. it lies anywhere between 0 and 100.
Now,
The equity believes that the target is not well managed and with a good management it's value can be increased by 50%
Now,
The owner of the target does not know the firm's worth. so, it may be profitable or the firm to accept the average outcome
Note: Kindly find an attached copy of the complete question for this example below.
Average outcome 0 + 100/2
= 100/2 = 50
Therefore, the lowest price the target's owners are willing to accept for the firm is 50
