Question
Suppose you're considering making an investment in one of two firms. Firm A has fixed costs that account for 50 percent of total costs, and
Suppose you're considering making an investment in one of two firms. Firm A has fixed costs that account for 50 percent of total costs, and variable costs account for 50 percent of total costs. Firm B has fixed costs that account for 80 percent of total costs, and variable costs account for 20 percent of total costs. Assuming everything else is equal and that you're risk adverse, which firm would you invest in and why?
A. Firm B because it's less risky
B. Firm A because it's less risky
C It doesn't matter because both firms have a similar amount of risk.
D. There isn't enough information
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