Recognizing risk Caradine Corp., a media services firm with net earnings of $3,2
ID: 2801617 • Letter: R
Question
Recognizing risk Caradine Corp., a media services firm with net earnings of $3,250,000 in the last year, is considering the following projects Project Initial investment $35,000 499,000 Details Replace existing office furnishings Purchase digital film-editing equipment for use with several existing accounts. Develop proposal to bid for a $2,170,000 per year 10-year contract with the U.S. Navy, not now an account. Purchase the exclusive rights to market a quality educational television program in syndication to local markets in the European Union, a part of the firm's existing business activities. 399,000 684,000 1) asked you, as chief financial officer,to evaluate the risk of each proposed project and rank it "low," "medium," or "high. The risk for project A is The risk for project B is The risk for project C is The risk for project D is 1 (Select from the drop-down menu)Explanation / Answer
1) The risk for project A is Low risk as the investment is low and just related to furniture.
2) The risk for Project B is Medium risk as the investment is related to equipment and would help in serving exisitng clients.
3) The risk for Project C is High risk as the entire amount could wash away if the bid goes unsuccessful.
4) The risk for Project D is High risk as the TV program is going to be run in a market which is not the home market and could involve significant risk.
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