Question: Hello could someone explain this to me, if possible with understandable intermediate steps Mini Case 26 An airline company under the threat of insolvency expects

Hello could someone explain this to me, if possible with understandable intermediate steps

Mini Case 26 An airline company under the threat of insolvency expects to have the following statedependent asset values at the end of the period (t=1), which are strongly influenced by the kerosene price: Kerosene price State High Middle Low Asset value of the company (in millions) 15 20 25 All states are equally likely, the participants are risk-neutral and the relevant interest rate is 10%. The claims of creditors senior to shareholders amount to 22 000 000 at the end of the period (t=1). Purchasing kerosene futures could smooth the company values at t=1 to 18 000 000, 20 000 000 and 22 000 000 respectively. Will the shareholders approve the futures purchase?

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