Use the Information for the Question(s)below

question 9

Multiple Choice

Use the information for the question(s) below.
Your firm faces an 8% chance of a potential loss of $50 million next year.If your firm implements new safety policies,it can reduce the chance of this loss to 3%,but the new safety policies have an upfront cost of $250,000.Suppose that the beta of the loss is 0 and the risk-free rate of interest is 5%.
-If your firm is uninsured,the NPV of implementing the new safety policies is closest to:

• A)$2.25 million.
• B)-$.25 million.
• C)$2.5 million.
• D)$2.15 million.

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Definitions:

Schizophrenia

One of the most serious psychological disorders, characterized by delusions, hallucinations, and disorganized speech. There are overall, adverse changes in thought, perception, emotion, and motor behaviour, and a feeling of depersonalization. Behaviour in some instances appears to be “autistic,” in the sense of being governed by internal stimuli or private events. The individual may be unresponsive to environmental stimuli that would normally prompt reactions, or may respond in a way that suggests a distorted interpretation of the stimuli. Ordinary objects or events seem to take on a marked personal significance. There is pronounced disruption of cognitive transactions: thought and language appear to become loosened from the normal constraints that make for coherent sequences of ideas and distinguish fantasy from reality. Often, some notion or theme involving malevolent forces or inordinate personal power increasingly commands the individual’s attention. Many people with schizophrenia appear to lose their intensity. Language may become impoverished, with little apparent effort or success at communication. They may become withdrawn socially and exhibit little interest in formerly enjoyable pursuits. Attention span may be markedly reduced. From the Greek schizein, “to split,” and phrenos, “mind.”

Epidemiological Research

The study of the distribution, patterns, and determinants of health and disease conditions in specified populations.

Situational Factors

External influences that affect an individual's behavior, decision-making process, and performance, which can vary depending on the context or environment.

Volitional

Pertaining to the use of one's will. Often refers to actions taken as a result of one's own choice or decision-making processes.