urgently need yhis Question 6You are making a bid to take over a company that George currently owns and controls.George has private information about whether the company is "good" or "bad," but youonly know that the company is bad with probability and good with probability 2. Youare well aware that he has this private information.As you can see from the matrix below, your expertise lies in controlling "good"companies. If the company is "bad," then it is more valuable under George's control thanyours.Value under George's Control Value under Your Control$40SOBad(Prob. 1/2)$80$140Good(Prob. 1/2)(a) Suppose you could make a single take-it-or-leave-it cash offer for the 100%ownership and control of this company. What is the offer that maximizes your expectedprofit? What are your expected profits from this offer? Explain.Your cash offer:Your expected profits:Justification: (b) Now suppose that you can make a take-it-or-leave-it equity-based offer to George:You will pay him SX in cash upfront plus an additional fraction Y of the future equityvalue of the company. What is the offer (consisting of X and Y) which maximizes yourexpected profit? Explain.Upfront cash payment X:Additional fraction Y:Justification:

Following matrix states the value of company under two conditions : Good or bad & also under…

Question 6 You are making a bid to take over a company that George currently owns and controls. George has private information about whether the company is "good" or "bad," but you only know that the company is bad with probability and good with probability 2. You are well aware that he has this private information. As you can see from the matrix below, your expertise lies in controlling "good" companies. If the company is "bad," then it is more valuable under George's control than yours. Value under George's Control Value under Your Control $40

Question 6 You are making a bid to take over a company that George currently owns and controls. George has private information about whether the company is "good" or "bad," but you only know that the company is bad with probability and good with probability 2. You are well aware that he has this private information. As you can see from the matrix below, your expertise lies in controlling "good" companies. If the company is "bad," then it is more valuable under George's control than yours. Value under George's Control Value under Your Control $40

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: The Basic Tools Of Finance

Section: Chapter Questions

Problem 9PA

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