How we measure risk is related to our perspective. The president of the company would look at
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Question:
- How we measure risk is related to our perspective. The president of the company would look at the correlation between projects which is measured by the correlation coefficient. The well-diversified shareholder would look at what measure of risk? While the project proponent would look at the standard deviation.
- Assume that most investors put together a well-diversified portfolio, and managers manage in the interest of the well-diversified shareholder. Should the manager be more interested in the diversifiable risk or non-diversifiable risk a project brings to the company? And which of these two does Beta measure?
- What does it mean to be risk-averse?
- For the same project, which break-even sales level is usually higher, the net present value breakeven or the income breakeven? Pick one
- Where in reality would you see the risk-seeking behavior?
- Decision trees force managers to conduct contingency planning, why is this important in measuring and managing risk?
- Three methods for developing probability estimates (not decision models) were discussed, what are they, and which of these is most common in practice?
- The ability to delay investment is a well-used risk management tool. How does this relate to using sequential investing to reduce risk?
- In simulations does the computer or the modeler supply the probabilities for the different model input variables?
- Would the breakeven point increase or decrease if the variable costs move from 45% to 40% of sales (all else constant)?
Related Book For
Mathematical Applications for the Management Life and Social Sciences
ISBN: 978-1305108042
11th edition
Authors: Ronald J. Harshbarger, James J. Reynolds
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