Precision Machine Ltd. manufactures pistons and rings for draglines and excavators that are used in oil sands exploration. Demand for these components is unpredictable but critical, as machines cannot operate without them. In an effort to ensure that customers are satisfied, Precision keeps about $100 000 worth of components in inventory at all times. The value of the inventory is covered by property insurance from SPADE Insurance Ltd. The policy contains a coinsurance clause that requires Precision to hold 80 percent coverage. Precision, however, only carries $60 000 worth of coverage. An electrical fire destroys some of Precision’s inventory and precision makes a claim of $30 000 on its policy. How much of the claim is Precision entitled to receive from SPADE? Why would Precision underinsure its inventory? How much is Precision entitled to receive from SPADE if its loss is $40 000?