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Risk and Decision Making

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1. If corporate managers are risk-averse, does this mean they will not take risks? Explain.

2. Explain how the concept of risk can be incorporated into the capital budgeting process.

3. If risk is to be analyzed in a qualitative way, place the following investment decisions
in order from the lowest risk to the highest risk:
a. New equipment.
b. New market.
c. Repair of old machinery.
d. New product in a foreign market.
e. New product in a related market.
f. Addition to a new product line.

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Solution Summary

This solution discusses how risk can be incorporated into the capital budgeting process.

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1. No, it means that they will do whatever they can to minimize risk like ...

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