A firm earns 25% interest on its invested capital. Interest available on assets that have a low degree of risk and are
Posted: Fri Jul 01, 2022 9:07 am
A firm earns 25% interest on its invested capital. Interest available on assets that have a low degree of risk and arehighly liquid is 10%. The firm is considering retaining acertain risk but top managers believe that a loss reserve fund of$100,000 is necessary. Insurance against the risk is available foran annual premium of $10,000. Based on these facts do youbelieve that the firm should retain the risk or do you believe thatcommercial insurance should be purchased? What otherinformation would you like to have before you make a decision?