User Account

All Pages

What is the expected cost for option

Assignment Help Business Management
Reference no: EM132865265

Assumer a firm owns a small warehouse. The warehouse is subject to risk of a fire. Below is the provability distrubution for losses:

Loss($) P(Loss)
0 0.72
3,750 0.13
8,250 0.08
9,500 0.05
11,000 0.02

The firm has six current management options it can use to manage this risk:

[1] Retention with a worry value of $650

[2] Insurance policy with a face amount (FA) of $13,000, a premium cost of $1,500 and a deductible of 180. Implement a loss reduction program that cost $50 and changes the probability of a $8,250 loss to 10%, a $9,500 loss to 4%, and a $11,000 loss to 1%. All other loss probabilities are kept the same. This option has a worry value of $425.

[3] Insurance of $11,000 with a premium cost of $2,100

[4] Insurance policy with a FA of $11,000, a premium of $1,850, and a deductible of 200. This option has a worry value of $400.

[5] Insurance policy with a face amount (FA) of $11,000, a premium cost of $1,650 and a deductible of 150. Implement a loss prevention program that cost $75 and changes the probability of a $0 loss to 73%, a $3, 75 loss to 14%,a $9,500 loss to 4%, and a $11,000 loss to 1%. The loss of $8,250 stays at 8%. This option has a worry value of $450.

[6] Insurance policy with a FA of $13,000, a premium of $1,700 and a deductible of 175. This option has a worry value of $415.

A} Construct a loss matrix. What is the expected cost for each option?

B} Assume that the risk manger makes the decisions based on total cost. What option would she choose?

Reference no: EM132865265

Questions Cloud

How influenced the westward expansion of the united states : How influenced the westward expansion of the United States. The idea of "Manifest Destiny" suggests that the expansion of the United States
Post to the Cost of Goods Sold T-account : Post to the Cost of Goods Sold T-account to show how this amount is determined. Label each item in the account. Assume it is year end
How society has or has not made significant changes : In the US the White culture tends to be the dominant culture, How society has or has not made significant changes to become more inclusive?
Explain how transactions are accounted for events : Explain how transactions are accounted for events after the reporting period. How to make adjustments for a non-counter balancing error
What is the expected cost for option : The firm has six current management options it can use to manage this risk:
Prepare the journal entries to record preceding information : Problem - Journal entries - Prepare the journal entries to record the preceding information and to transfer Factory Overhead to Work in Process
Example of a flow of goods or services : -Give an example of a flow of goods or services from one country to another that makes international trade feasible and possible. and give a brief explanation
Explain competitor analysis of tesla motor : Explain competitor analysis of Tesla Motor such as, BMW, Volkswagen and BYD.
What is the net realizable value of accounts receivable : The entity decided to provide P26,000 for doubtful accounts at the end of the year. What is the net realizable value of accounts receivable on December 31, 2014

Reviews

Write a Review

Business Management Questions & Answers

  Application of the normal distribution

Each American uses an average of 650 ibs (285 kg) of paper a year. Suppose that the distribution is approximately normal with a population.

  How does federalism affect policy development

How does federalism affect policy development? How then does policy development affect the rights of the individual? What is the overall effect?

  How exposed is your country to globalization

What have been the political, economic, technological, social, environmental, or other impacts of the globalization trend on your country?

  Evaluate techniques to enhance design of work processes.

Create a critical analysis through answering the following: Evaluate techniques to enhance design of work processes, process control, and process improvement.

  Evaluate at least three communication methods

Evaluate at least three communication methods that can be used to ensure information is disseminated effectively throughout the organisation.

  Create a organisational chart for a school

It should indicate that there are relationships between colleagues to seek assistance from when difficulties arise.

  Suppose the own price elasticity of demand for good x

Suppose the own price elasticity of demand for good X is -3, its income elasticity of demand is 1, its advertising elasticity of demand is 2

  Which methods would you consider better first-choice methods

MGMT 404- Which methods would you consider better first-choice methods by most project sponsors? Would any of these methods apply to Agile projects? How does Agile address schedule compression?

  Divide into two groups and prepare arguments

Divide into two groups, and prepare arguments for treatment.

  Identify consequences of decision made public administrators

Identify some of the consequences of decisions made by public administrators in this case. Consider the case through the lens of ethical issues that arise.

  Main goals profitability and growth

A business that is characterized by innovative strategic practices and which has as its main goals profitability and growth is called

  Marketing and communication techniques for health care

When selecting marketing and communication techniques, health care organizations must carefully examine their consumer populations

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd