Incentives to gamble when equity is low YO Net operatingassets (investedcapital 100.00 Debt 80.00 Equity 20.00 Tax rate 0_0036 interestrate 10.004 Payoff's Y1 Management Y1 Base Y1 Downside Probability 33.3536 33.336 Pre tax ROIC [Operatingprofit Beginning VOA) 40.006 10.00 - 40.008 Profit from the sale of net operating assets Cash receivedfrom the sale of net operatingassets Interest due to lenders Principaldue to lenders =Total due to lenders Total actually paid to lenders IAR for lenders in % Probabilityweighted RA for lenders 0.00%% Residual claimed by shareholders IRR for shareholders Probability weighted IRR for shareholders 0.00%