Use the Information for the Question(s)below

question 61

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 net present value (NPV) of implementing the new safety policies is closest to:

• A)$2.15 million
• B)$2.5 million
• C)$2.25 million
• D)-$.25 million
• E)$2.75 million

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Definitions:

Brain Activity

The electrical and chemical processes in the brain that facilitate thinking, feeling, and functioning.

Biology

The scientific study of life and living organisms, including their structure, function, growth, evolution, and distribution.

Behavior

The actions or reactions of an organism or system, usually in response to external stimuli.

Oxytocin

A hormone and neurotransmitter involved in childbirth and lactation, also associated with behaviors like bonding, trust, and empathy.