Business, 07.04.2020 02:54 Isaiahtate053

Ellis Company owns a small oce building worth $200,000. Cameron is the risk manager. Ellis faces the risk of re which would completely destroy their building. The probability of a re is known to be 5%..

Cameron is considering the following risk management options to address the risk of fire to their building:a. Retentionb. Full Insurance for a premium of $10,000c. Safety Program & Retentiond. Safety Program & Full Insurance (premium falls to $8,000)The cost of the Safety Program is $1,500. It has the impact of lowering the probability of a fire from 3% to 2%. However, if a fire does occur, it is still a full loss. Imagine the federal government instituted a $1000 "mandate" for full insurance. That is, Ellis Company must pay a penalty of $1000 if they do not purchase full insurance. How would this affect Cameron's PMAX?

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Ellis Company owns a small oce building worth $200,000. Cameron is the risk manager. Ellis faces the...