Global gas international offers to subcontract the halidurton heavy construction corporation to build an oil pipeline from canada to new orleans for $500 million. the probability that the oil pipeline will leak causing environmental damage is θ. if so, the legal liabilities will be $600 million.

a. if halidurton is risk neutral and liable for the damages from a leak, what is the θ such that it is indifferent between accepting or rejecting the contract?

b. if halidurton is risk averse and fair insurance is offered, how much insurance would it buy?

c. if global gas international will partially indemnify halidurton so that the largest damages that halidurton would have to pay is $200 million, what is the θ that leaves it indifferent about accepting the contract?

d. if partially indemnified, how much fair insurance will halidurton buy?

You and your new australian bride matilda, are applying for a loan and are required to submit a balance sheet with your net worth. you own a 2008 toyota camry that you bought last month for $9,995. the kelly blue book value for this car is $13,995. you owe $8,150 on the car loan for the camry. you pay off your visa credit card every month and have not paid any credit card interest this year. the current visa credit card balance is $3,522, and the next statement is due in 15 days. you have a student loan balance of $6,500. you presently have $425 in your checking account and $1,540 in your savings account. you own 100 shares of ibm stock that you purchased for $85.50 per share. one share of ibm is now selling for $158.42. you own computers and other electronics that you purchased for $4,100 but could probably sell today on e-bay for $1,800. your gross income is $80,000 per year. what is your current net worth? (see wb ch. 2 example 2.3)

3. describe the purpose of the sec. (1-4 sentences. 2.0 points)

Garrett is an executive vice president at samm hardware. he researches a proposal by a larger company, maximum hardware, to combine the two companies. by analyzing past performance, conducting focus groups, and interviewing maximum employees, garrett concludes that maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. what actions should garrett and samm hardware take? a. turn down the acquisition offer and prepare to resist a hostile takeover. b. attempt a friendly merger and use managerial hubris to improve results at maximum. c. welcome the acquisition and use knowledge transfer to impart sam hardware's management practices. d. do nothing; the two companies cannot combine without samm hardware's explicit consent.