Fin419 Wk2 Individual

P5-3 - Risk Preferences Sharon Smith, the fiscal manager for Barnett Corporation, wishes to value three likely investings: X, Y, and Z. Currently, the firm earns 12% on its investments, which befuddle a peril index of 6%. The pass judgment hark back and expected happen of infection of the investments are as follows: |Investment | evaluate overtake |Expected hazard index | |X |14% |7% | |Y |12% |8% | |Z |10% |9% | a) If Sharon were risk-indifferent, which investments would she recognise? Explain why. If Sharon were risk-indifferent, she would select Investments X and Y because they have a higher return than 12% and risk wou ld non be pertinent. b) If she were risk-averse, which investments would she select? why? If Sharon were risk-adverse, she would select Investment X because it provides the highest return and has the lowest expected risk index. c) If she were risk-seeking, which investments would she select? Why?

If Sharon were risk seeking she would select Investments Y and Z because she would be not be concerned with taking the greater risk. d) abandoned the traditional risk preference behavior exhibited by financial managers, which investment would be preferred? Why? Financial managers have trad itionally been more risk-averse, and would l! ikely choose Investment X because it provides the troupes normal increase in return and has increase risk. P5-4 - Risk analysis Solar Designs is considering an investment in an expanded output line. Two possible types of expansion are being considered. afterward investigating the possible outcomes, the company make the estimates shown in the undermentioned table: |  |  | magnification A |Expansion B | | sign investment...If you want to get a lavish essay, order it on our website: BestEssayCheap.com

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