A has an opportunity to invest $90,000 in a project that is expected to generate annual cash inflows of $60,000 for each of the next three years. The project’s beta coefficient implies a discount rate of 12% for this project, based on a risk-free rate of return of 3%.
A is prepared to forego the expected cash flows from this project in return for a guaranteed payment of $50,000 at the end of year 1, $42,000 at the end of year 2 and $30,000 at the end of year 3.
What is the certainty equivalent value of this opportunity to A?
Correct Answer:B
Which of the following is NOT a financial risk.
Correct Answer:D
Company H operates a fleet of lorries.The Internal Auditor recently conducted an investigation into the transport needs of the company.Their report recommended that the lorries be disposed of, the drivers made redundant, and the distribution of the company’s products be outsourced.
The type of investigation carried out by theInternalAuditor is best described as a:
Correct Answer:D
An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.
Which of the following best explains the relevance of quantifying the risk in that way?
Correct Answer:A
Prep2Certsis a premium service offering a comprehensive collection of exam questions and answers for over 1400 certification exams. It is regularly updated and designed to help users pass their certification exams confidently.
Please contact info@Prep2Certs.com and we will provide you with alternative payment options.
You can by Contacting our sales team.