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aksik [14]
3 years ago
12

Suppose that an investor is considering three alternative strategies: conservative, neutral, or aggressive. If economic conditio

ns get better, then the strategies will return, respectively, 6%, 12%, and 20%. If economic conditions get worse, then the strategies will return, respectively, 4%, 2%, and -8%. If better economic conditions has a probability of only 25%, then using the expected value criterion which alternative would the investor select?
Business
1 answer:
Elan Coil [88]3 years ago
3 0

Answer:

The answer is: Following the expected value criterion the investor should choose indistinctively between the conservative or neutral alternatives.

Explanation:

The formula we use to calculate the expected return value of the different alternatives is:

            ERV = ∑ (expected return x probability of occurrence)

The conservative alternative has an expected return value of of 4.5%

ERV Conservative = (6% x 25%) + (4% x 75%) = 4.5%

The neutral alternative also has an expected return value of of 4.5%

ERV Neutral = (12% x 25%) + (4% x 75%) = 4.5%

The aggressive alternative has an expected return value of of -1%

ERV Aggressive = (20% x 25%) + (-8% x 75%) = -1%

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3 years ago
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Mega-Big Corp. has a small strategic business unit (SBU) that produces a component vital to the manufacturers of automobiles and
galina1969 [7]

Answer:

Cash cow

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In the BCG matrix, If business unit lies in the category of a Cash cow, then it is considered as market leader as it generates more income and company are able to get a good return out of investment in this business unit. In the matrix, the Business unit have high market share, however, it has less growth prospect.  

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4 years ago
A publishing company has estimated the following cost probability distribution for the next year. What is the expected cost to t
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Explanation:

First find the probability of a $2,000 loss.

= 1 - other probabilities

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3 years ago
Gilda has an idea that would streamline​ operations, reduce​ costs, and increase profits. Her idea requires the cooperation of s
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Answer:

Evidence based.

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