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Assume a firm owns a small warehouse Assume that the warehouse is subject to the risk of a fire. Subject to the following loss probability
Assume a firm owns a small warehouse Assume that the warehouse is subject to the risk of a fire. Subject to the following loss probability distribution The firm has four current risk management options to use to manage this risk. Retention with a worry value of $375 Insurance policy with a FA of $2, 500 and a premium cost of $425. Worry value of $260 Insurance policy with a FA of $15,000 and a premium cost of $800. Deductible of $2, 500. Worry value of $125 Full Insurance with a premium cost of $1500. Construct an after-tax loss matrix. Assume that the firm's marginal tax rate is 23%. What is the expected after tax cost for each option Assume that the risk manager makes decisions based on total cost. What option would she choose
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