# Risk managment | Business & Finance homework help

1.       Suppose New Ghana Brewing Company’s property losses have the following distribution.

Don't use plagiarized sources. Get Your Custom Essay on
Risk managment | Business & Finance homework help
Just from \$13/Page

 Loss Probability \$6,500,000 0.01 \$4,000,000 0.01 \$2,000,000 0.04 \$700,000 0.08 0 0.86

a.       What is the expected value of New Ghana’s property losses (aka, the actuarially fair value of insurance)?

b.       What is the standard deviation of New Ghana’s expected property losses?

c.     Suppose PC Inc, New Ghana’s insurance carrier, charges a 40% load when determining its property and casualty insurance premiums.  What would they charge New Ghana for property insurance, i.e., what will the premium be?

d.    Assume that New Ghana’s property losses are normally distributed (they aren’t, of course) with mean and standard deviation equal to the expected value and standard deviation you calculated in a. and  b.  What is New Ghana’s probable maximum loss (PML) at the 95% level?[1]  (critical value = 1.645)

e.    Suppose New Ghana’s CRO makes this assumption.  Would the estimated PML underestimate or overestimate New Belgian’s true PML?  Why?

2.       Bird Song Industries makes a bird seed that sets native song birds singing all day long.  Its product has been discovered by the back-to-nature crowd around the world.  As a result, Bird Song’s executives expect free cash flow (FCF) to grow rapidly over the next 4 years.  The forecast FCFs are 20, 40, 75 and 90 in years 2016 – 2019, respectively.  However, by 2020 Bird Song expects growth to slow to 3% per year in perpetuity.  Bird Song’s weighted average cost-of-capital (WACC) is 9%.   What is Bird Song’s fundamental value?

3.       Briefly explain the relationship between capital structure, insurance and strategic risk management.  When do insurance and risk management add to firm value?  When do they not add to firm value?

[1] There is a fair amount of confusion (including mine) about MPL (maximum possible loss), MPL (maximum probably loss) and PML (probable maximum loss.  According to IRMI.org, MPL (maximum possible loss) is the most that could be lost; MPL (maximum probably loss) and PML are one in the same and represent the greatest the loss will be some percent (e.g., 95%) of the time.  To confuse matters still further, sometimes the term ‘Maximum Probable Loss’ is used.  This term is just another way of saying ‘Probable Maximum Loss.’

Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

### Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

### Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors: