ABC Co$.$ is currently operating two active oil fields with a

market value of $$200$ million each. ABC has $$500$ million

in debt coming due at year end. Another firm has offered

ABC a highly speculative, but potentially very valuable oil

& gas lease in exchange for one of their active oil fields. If

ABC accepts the trade, here are the potential scenarios with

probability weights.

$10\%$ : Discovers a major oil field worth $$1\mathrm{.}2$ billion.

$15\%$ : Discovers an oil field worth $$600$ million.

$75\%$ : ABC will not discover oil at all.

Suppose shareholders decide whether to accept the trade.

What do you think would happen? What is the agency prob$-$

lem here?