Use the Information for the Question(s)below

question 1

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 fully insured,the NPV of implementing the new safety policies is closest to:

• A)$2.15 million.
• B)$2.5 million.
• C)$2.25 million.
• D)-$0.25 million.