Fin419 Wk2 Individual

P5-3 - Risk Preferences Sharon Smith, the fiscal manager for Barnett Corporation, wishes to valuate three potential investings: X, Y, and Z. Currently, the firm earns 12% on its investments, which realise a peril index of 6%. The judge hark back and expected happen of infection of the investments argon as follows: |Investment | evaluate drive out |Expected bump 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 would 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) disposed(p) the traditional risk preference behavior exhibited by financial managers, which investment would be preferred? Why? Financial managers have tradi tionally been more risk-averse, and would li! kely 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: |  |  | refinement A |Expansion B | | sign investment...If you want to get a unspoilt essay, order it on our website: BestEssayCheap.com

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