=13.12. Refer to the financial risk analysis example presented in Section 13.5, including its results shown in Figure 13.27. ThinkBig management is quite concerned about the risk profile for the proposal. Two statistics are causing particular concern. One is that there is nearly a 20 percent chance of losing money (a negative NPV). Second, there is a 10 percent chance of losing more than a third ($7 million) as much as the mean gain ($18 million).

Therefore, management is wondering whether it would be more prudent to go ahead with just one of the two projects. Thus, in addition to option 1 (the proposal), option 2 is to take a 16.50 percent share of the hotel project only (so no participation in the shopping center project) and option 3 is to take a 13.11 percent share of the shopping center only (so no participation in the hotel project). Management wants to choose one of the three options.

Risk profiles now are needed to evaluate the latter two.