Question: 2. (Chapter 9: Questions and Problems 8) Suppose that a business expects to have profits of $100000 if it is not sued over the coming

2. (Chapter 9: Questions and Problems 8) Suppose that a business

2. (Chapter 9: Questions and Problems 8) Suppose that a business expects to have profits of $100000 if it is not sued over the coming year. The probability of a suit is 0.04 and the loss if a suit occurs is $250000. The firm's tax rate if it earns positive profits is 30%. If it makes negative profits, it pays a 0% rate. (a)(10\%). What is the firm's before tax expected profit without insurance? What is it's after-tax expected profit without insurance? (b) (10%). What is the firm's expected before- and after-tax profit if it purchases a liability insurance policy with full coverage for a premium of $11000 (assume that the premium is a tax-deductible expense)

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