Problem $2.$ Zymase is a biotechnology start$-$up firm. Researchers at Zymase must choose one of

three different research strategies. The payoffs $($after$-$tax$)$ and their likelihood for each strategy are

shown below. The risk of each project is diversifiable.

a$)$ Which project has the highest expected payoff?

b$)$ Suppose Zymase has debt of $$40$ million due at the time of the project$$s payoff. Which

project has the highest expected payoff for equity holders?

c$)$ Suppose Zymase has debt of $$110$ million due at the time of the project$$s payoff. Which

project has the highest expected payoff for equity holders?

d$)$ If management chooses the strategy that maximizes the payoff to equity holders, what is

the expected agency cost to the firm from having $$40$ million in debt due? What is the

expected agency cost to the firm from having $$110$ million in debt due? Problem $2.$ Zymase is a biotechnology start$-$up firm. Researchers at Zymase must choose one of

three different research strategies. The payoffs $($after$-$tax$)$ and their likelihood for each strategy are

shown below. The risk of each project is diversifiable.

a$)$ Which project has the highest expected payoff?

b$)$ Suppose Zymase has debt of $$40$ million due at the time of the project's payoff. Which

project has the highest expected payoff for equity holders?

c$)$ Suppose Zymase has debt of $$110$ million due at the time of the project's payoff. Which

project has the highest expected payoff for equity holders?

d$)$ If management chooses the strategy that maximizes the payoff to equity holders, what is

the expected agency cost to the firm from having $$40$ million in debt due? What is the

expected agency cost to the firm from having $$110$ million in debt due?