Solution-What is the npv of implementing the new policies

What is the npv of implementing the new policies

Reference no: EM132816013

1. Your firm faces a 9% chance of a potential loss of $10 million next year. If your firm implements new policies, it can reduce the chance of this loss to 4%, but these new policies have an upfront cost of $100,000. Suppose the beta of the loss is 0, and the risk-free interest rate is 5%.

(a) If the firm is uninsured, what is the NPV of implementing the new policies?

(b) If the firm is fully insured, what is the NPV of implementing the new policies?

(d) What is the minimum-size deductible that would leave your firm with an incentive to implement the new policies?

(e) What is the actuarially fair price of an insurance policy with the deductible in part (d)?

2. What are the advantages and disadvantages of the corporate organizational structure? And Explain the costs and benefits of prohibiting insider trading?

Reference no: EM132816013

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What is the npv of implementing the new policies

Reference no: EM132816013

Reference no: EM132816013

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