ARM 401 Assignment A Segment 3 Questions and Answers 2023/2024 Solved 100% Correct

In Fred's large landscaping business, he knows that there is a point where equipment becomes unsafe and difficult to maintain. Fred realizes that after 2,000 miles of use, his costs for maintenance on his large mowers and sod busters dramatically rise. Using probability analysis Fred can better know - ANSWER-When to replace equipment. Which one of the following statements is true if earnings at risk are $200,000 with 90% confidence? - ANSWER-Earnings at risk are projected to be less than $200,000 10% of the time. Determining earnings-at-risk (EaR) entails modeling the influence of factors such as - ANSWER-Changes in the prices of products and production costs on an organization's earnings. Timber Company has sold lumber and wooden poles for many years. The company is considering expanding into plywood production by building a plywood manufacturing facility. As this is a major decision, the company gathered data on the following variables: labor costs, cost of raw materials (wood, glue, etc.), energy costs, sales price (dollars per square foot), and estimated sales volume. A probability distribution for each of these variables was created. Then a computer was programmed to select a value from each probability distribution and to calculate the net income before taxes. The computer was programmed to repeat the calculation 250,000 times, and to create a probability distribution of the outcomes. The results showed an expected value of $2.35 million in annual net income before taxes. Eighty-two percent of the outcomes were positive net income before taxes. The type of analysis that Timber Company performed is called - ANSWER-Computer simulation A group of large life insurance companies pooled their mortality data over the past 25 years. Based on the pooled mortality data, a mortality table showing the probability of death at specified ages was developed. The insurers used these probabilities in pricing life insurance products. The probabilities developed from the pooled mortality experience of the insurers are best described as - ANSWER-Empirical probabilities. Which one of the following statements is true regarding event tree analysis? - ANSWER-event tree analysis typically provides only two options, success or failure. Widget Manufacturing Company has noticed that its loss frequency and severity has increased in the past two years as its production has increased. In order to better forecast loss frequency and severity, Widget Manufacturing Company should consider using - ANSWER-Trend analysis.