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This is an insurance class. I need help with the math problems and whether or not the projects should be reccomended. I can handle the
This is an insurance class. I need help with the math problems and whether or not the projects should be reccomended. I can handle the longer word responses.
DESCRIPTION OF THE SCENARIO: Eastern Bound Trucking (EBT) is a trucking company operating in the Western United States. You are the risk manager of EBT. At th ways to handle the company's risks in a more economical way. The CEO stressed that you should consider not only pure risks but a You discovered that a significant financial risk facing the organization is a commodity price risk - the risk of a significant increase in income and expense statement showed that last year about 28% of its expenses were related to fuel. You were also asked to determine whether the installation of a new sprinkler system at the corporate headquarters building would project would provide an after-tax net cash flow of $25,000 per year for three years, with the first of these cash flows coming one y EBT is considering expanding its routes to include Colorado, New Mexico, Texas and Oklahoma. With the expansion, EBT trucks will about the number of accidents that might occur. Utilizing the company's new RMIS, you ran a regression with \"thousands of miles accidents\" as the dependent variable. Results of the regression are as follows: Y = 2.31 + .022X Complete the worksheets on tabs A-D of this workbook. Imagine you are completing tabs A-D to support the drafting of a report to the CEO. Knowing the CEO was on the fence about spen how you used the new system to complete your analysis to illustrate the value the investment is returning to the organization. A Risk: Commodity Price Risk of Fuel Description: EBT could experience a significant increase in the price of fuel for the company's trucks. Last year about 28% of EBT expenses were related to fuel. Desired Risk Treatment Result: Lock in the future cost of fuel to make fuel expenses more predictable. Recommendation to the CEO (include an explanation of the financial tool you'll use and how you'll use it to produce the desired result): We should purchase futures contracts to lock in a more stable fuel price. Futures contracts will ensure that we will only pay the agreed upon price for fuel at set time in the future. The contract will help us hedge against any increase in fuel prices. We are a large consumer and that may allow us to negotiate a lower price than what we have been paying. The stability of fuel prices, from the futures contract, will also make planning much easier because fuel costs are now a constant instead of a variable. B Risk: Investment in New Sprinkler System for Headquarters Description: Determine if the installation of a new sprinkler system at the corporate headquarters building would be a good investment. Assume Investment and Benefits come at the end of each respective year. Desired Resolution: EBT invests in the sprinkler system only if it is a positive use of the required $40,000 investment. Net Present Value Analysis: NPV = - Amount of Investment + First Year Benefit (1 + interest rate) + Second Year Benefit Third Year Benefit (1 + interest rate)2 + (1 + interest rate)3 Fourth Year Benefit + (1+interest rate)4 Student: Fill in the four missing values for the step-by-step calculations in this NPV formula using the information provided on the "Background" tab. NPV = - $ $ + (1 + 0.10) $ $ ((1 + 0.10)*(1 + 0.10)) + + (1.1*1.1*1.1) $ + (1.1*1.1*1.1*1.1) Student: Complete the interim calculations necessary to complete each cell below. NPV = - $ + + + + Student: Finish calculating the value of the NPV and fill in your answer in the cell below. NPV = $ Recommendation to the CEO (include your explanation of why a NPV analysis is appropriate, and your recommendation regarding the investment based on the NPV you calculated): (type your response here) d investment. Assume Investment and Fourth Year Benefit (1+interest rate)4 kground" tab. $ (1.1*1.1*1.1*1.1) garding the investment based on the C Risk: Increased Accidents Due To Proposed Expansion Description: EBT's trucks will cover more miles if proposed expansion plans are pursued. Management needs to know how many accidents EBT should expect as a result of the expansion. Desired Risk Analysis Result: Provide a reasonably accurate prediction of the number of accidents EBT will experience once the number of miles its fleet travels increases to the expected 640,000. Results of Regression Analysis Y = 2.31 + .022X Variables Y= (type description of Y here) X= (type description of X here) Step-by-Step Calculations Y = 2.31 + .022___ Y = 2.31 + ____ Y = ____ (type value of X here) (type value of .022X here) (type value of Y here) Recommendation to the CEO (include your explanation of why you used a regression analysis and include the number of accidents that are expected): (type your response here) D Risk: Investment in a RIMS Description: EBT implemented a RMIS last year. The CEO was not fully supportive of this investment. Desired Result: Include a paragraph or so in the report explaining how you utilized the RMIS to complete your analysis to illustrate the value the investment is returning to the organization. Recommendation to the CEO (include a one-paragraph description of the RMIS utilized to complete your regression analysis)Step by Step Solution
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