Question

1.Kimberly-Clark Company owns a warehouse worth $400,000. Ray Van Eperen. is the risk manager. Kimberly-Clark faces...

1.Kimberly-Clark Company owns a warehouse worth $400,000. Ray Van Eperen. is the risk manager. Kimberly-Clark faces the risk of fire which would completely destroy their building. The probability of a fire is known to be 10%.Kimberly-Clark is considering the following risk management options to address the risk of fire to their warehouse

:

[1]Retention

[2]Full Insurance for a premium of $45,000

[3]Safety Program + Retention

[4]Safety Program + Full Insurance [premium falls to $30,000]

The cost of the Safety Program is $12,000. It has the impact of lowering the probability of a fire from 10% to 6%. However, if a fire does occur it is still a total loss.

1.) Construct a loss matrix. [4 points]

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Ellis Company owns a small office building worth $400,000. Cameron is the risk manager. Ellis faces...
Ellis Company owns a small office building worth $400,000. Cameron is the risk manager. Ellis faces the risk of fire which would damage their building. The probability of a fire is known to be 5%. If a fire occurs, there is a 25% chance of a full loss and a 75% chance of a half loss ($200,000). Cameron is considering the following risk management options to address the risk of fire to their building: a. Retention b. Full Insurance for...
Tim owns a house worth $400,000. Unfortunately, he faces a 40% risk of a loss of...
Tim owns a house worth $400,000. Unfortunately, he faces a 40% risk of a loss of $300,000. He is an expected utility maximizer with a utility function . He can buy insurance coverage K at a price of g per dollar of coverage. Suppose that g is subsidized by the government and he only pays $0.25 cents for each dollar of coverage (i.e. g= 1/4). What is his optimal coverage. Note:coverage can not exceed losses.
Tim owns a house worth $400,000. Unfortunately, he faces a 40% risk of a loss of...
Tim owns a house worth $400,000. Unfortunately, he faces a 40% risk of a loss of $300,000. He is an expected utility maximizer with a utility function u(c)= ln(c). He can buy insurance coverage K at a price of g per dollar of coverage. Suppose that g is subsidized by the government and he only pays $0.25 cents for each dollar of coverage (i.e. g= 1/4). What is his optimal coverage. Note:coverage can not exceed losses.
1. SoCal Movie Company produces movies at a studio in Southern California. The risk manager decided...
1. SoCal Movie Company produces movies at a studio in Southern California. The risk manager decided to identify the range of potential consequences associated with various risks that the company faces. For example, if a severe earthquake occurred while the company was filming a movie, there could be deaths and injuries, destruction of movie sets, delays in production, costs associated with filming at an alternative location, and loss of reputation and good will. The type of analysis performed by the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT