Fin419 Wk2 Individual

P5-3 - Risk Preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to value three prospective investings: X, Y, and Z. Currently, the firm earns 12% on its investments, which train a assay index of 6%. The expect hark back and expected happen of infection of the investments ar as follows: |Investment | evaluate cave in |Expected risk 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) tending(p) the traditional risk preference behavior exhibited by financial managers, which investment would be preferred? Why? Financial managers have traditiona lly been more risk-averse, and would likely ! 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 do the estimates shown in the undermentioned table: |  |  | refinement A |Expansion B | | sign investment...If you want to get a enough essay, order it on our website: BestEssayCheap.com

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