Dr. Pennyworth has a chance to purchase one of two professional cricket clubs, t

Question

Dr. Pennyworth has a chance to purchase one of two professional cricket clubs, the Miami Manatees or the Jacksonville Gemini. At the beginning of last year, the Manatees were purchased for $100 million, provided $10 million in profits, and are currently on sale for $110 million. On the other hand, the Gemini started the year purchased at $80 million, provided $30 million in profits, and are currently on sale for $140 million.

For the above problem, you project that the most optimistic profits for the Manatees this year is $35 million, while the most pessimistic projection is $5 million. Your projections for the Gemini are $32 million and $7 million, respectively. Based only on the range, which do you think is the riskier investment? Which one would you choose?

Explanation / Answer

Jaskonville is the riskier investment because the purchase price is $140 million and the profit as per optimitic approach is $ 32 million whereas for Manatees the purchase price is $110million and the profit expected is $35 million . So the pofit is more in case of Manatees and the investment is less. So Manatess should be choosen overe Jackonville

Manatees Jacksonville Purchased 100 80 profit 10 30 price 110 140 Optimistic 35 32 Pessimistic 5 7

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