The Griffey$-$Lang Food Company faces a difficult problem. In management's effort to

grow the business, they accrued a debt of $$150$ million while the value of the company

is only $$125$ million. Management must come up with a plan to alleviate the situation in

one year or face certain bankruptcy. Also upcoming are labor relations meetings with

the union to discuss employee benefits and pension funds. Griffey$-$Lang at this time has$460$ PART VI $$ CORPORATE FINANCE

three choices they can pursue: $(1)$ Launch a new, relatively untested product that if

successful $($probability of $0\mathrm{.}12)$ will allow G$-$L to increase the value of the company to

$$200$ million, $(2)$ sell off two food production plants in an effort to reduce some of the

debt and the value of the company, thus making it even less likely to avoid bankruptcy

$(0\mathrm{.}45$ probability of success$),$ or $(3)$ do nothing $($probability of failure $=1\mathrm{.}0).$

a$.$ As a creditor, what would you like Griffey$-$Lang to do$,$ and why?

b$.$ As an investor?

c$.$ As an employee?