16. Under favorable weather conditions, the management of Forever Farms expects its rice crop to have a P120,000 market value. An unprotected crop subject to pests has an expected market value of P80,000. If Forever protects the rice against pests, the market value of the crop is still expected to be P120,000 under pest-free conditions and P180,000 if pests are present. What must be the probability of pests for Forever to be indifferent to spending P20,000 for tents to provide pest protection? 0.167 b. 0.200 a. с. 0.250 d. 0.333

16. Under favorable weather conditions, the management of Forever Farms expects its rice crop to have a P120,000 market value. An unprotected crop subject to pests has an expected market value of P80,000. If Forever protects the rice against pests, the market value of the crop is still expected to be P120,000 under pest-free conditions and P180,000 if pests are present. What must be the probability of pests for Forever to be indifferent to spending P20,000 for tents to provide pest protection? 0.167 b. 0.200 a. с. 0.250 d. 0.333

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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7
Sunny Groves is a citrus grower in a southern state that has several citrus orchards. Weather forecasters are predicting a significant drop in temperatures over the next two days. The forecast calls for a 25% chance of near-freezing temperatures and a 10% chance of a deep freeze. The management of Sunny Groves is concerned that the impending bad weather may damage their crop of citrus fruit. If the weather is fine, the company stands to make $1,000,000 revenue for their harvest. There are three options that the company can take in light of the coming weather: (1) Do nothing and hope for the best. If the orchards experience near-freezing temperatures, the company will lose half of its crop (and half of the revenue). A deep freeze would destroy all of the fruit (and lead to no revenue). Obviously, taking no precautions costs nothing. (2) Take moderate precautions. This involves having many workers placing heaters and warming tents about the orchards. This would cost $50,000 and reduce…
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