THE TRADE-OFFS BETWEEN RISKS AND RETURNS

The risk profile is the willingness of the company to take risk in decisions to help the company succeed. The risk can be rewarding or cause the company to fail. Some risks of engaging in the capital investment project of buying new equipment would be maintenance could lead to potential down time, training will be needed and could be costly and time consuming, and the equipment may not work as intended.

I believe the company is very willing and capable of taking on and managing these risks. The company will not only train their employees in how to use the equipment but also how to maintain it. This will help save money for additional money that would be needed outside the company to fix the equipment. The training would be costly but beneficial to the company in the run. Once training is completed the employees will be able to perform work and show others for on-the-job training.

Before the company finalize their decision to make the major purchase of the new equipment, they could have test equipment sent so they won't be any permanent decisions until they know that the equipment is compatible.

According to (Savvides, 2022, p. 75) an equity investment can only be estimated through appraisal and cash flow projections. Risk is assessed through probabilistic analysis of the key variables in a financial model. The trade-off between the risks and possible returns of going forward with this capital investment project would be the risk of the company having to put out a lot of money towards the new equipment and not be able to know if the projection of installing the new equipment will work as plan. The organization should move forward with project because it will benefit the company because it will help the employees complete the work faster and produce more products.