Modigliani and Associates has forecasted the following payoffs from a project. Outcome Probability of Outcome Assumptions $0 20% pessimistic $3500 60% moderately successful $6000 20% optimistic What is the expected value of the outcome?

Modigliani and Associates has forecasted the following payoffs from a project. Outcome Probability of Outcome Assumptions $0 20% pessimistic $3500 60% moderately successful $6000 20% optimistic What is the expected value of the outcome?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 2P

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Concept explainers

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.

Question

Modigliani and Associates has forecasted the following payoffs from a project.

Outcome Probability of Outcome Assumptions

$0 20% pessimistic

$3500 60% moderately successful

$6000 20% optimistic

What is the expected value of the outcome?

Leveraging special tenchniques in analyzing historical data to predict future trends. Forecasting covers the methods and types of forecasting and their application to case studies.

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