The Risk of Fire at a Car Assembly Plant Is

question 56

Multiple Choice

The risk of fire at a car assembly plant is 0.1%.If the firm will receive a payment of $40 million in one year if there is a fire during the year,what is the net present value (NPV) of purchasing insurance if the firm will face financial distress costs of $7 million and issuance costs of $1 million in the event of a loss if the risk-free rate is 5%?

• A)$5,421
• B)$6,415
• C)$6,923
• D)$7,619
• E)$7,142

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Definitions:

Apraxia

A serious disturbance in beginning or carrying out voluntary movements.

Voluntary Action

Actions initiated and controlled by an individual's conscious choice, contrasting with involuntary or reflexive movements.

Broca's Area

A region in the frontal lobe of the dominant hemisphere of the brain linked to speech production and language processing.

Motor Representation

the neural basis of the planning and execution of movement, residing in the brain's motor cortex.