Modigliani and Associates has forecasted the following payoffs from a project: Outcome Probability of Outcome Assumptions $ 0 20% pessimistic $ 3,500 60% moderately successful $ 6,000 20% optimistic What is the expected value of the outcomes?

Modigliani and Associates has forecasted the following payoffs from a project: Outcome Probability of Outcome Assumptions $ 0 20% pessimistic $ 3,500 60% moderately successful $ 6,000 20% optimistic What is the expected value of the outcomes?

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
$	3,500		60%	moderately successful
$	6,000		20%	optimistic

What is the expected value of the outcomes?

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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