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    Investment Decision Risks

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    5. 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 Preview

    Lowest risk: Repair of old machinery
    This is low because you basically know the machine works and will produce your product plus it has already been depreciated so you don't have to worry about it losing significant value.

    Moderate risk: New equipment
    This is more risky because even though it's new and will probably produce a good product, there could be things ...