Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 23, Problem 23.2CTF

Keith is preparing a graph that compares the value of his firm to various prices for his firm’s services. This graph is called a __________.

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Summary Introduction

To discuss: The graph that compares the value of the firm at various prices of services.

Introduction:

A figure is the graphical representation of financial results. To prepare any graph, it requires numerical information in the background. This will help to understand and analyze the results easily.

Explanation of Solution

The person KT is preparing a graph. This graph is to compare the value of the firm with prices for its services. This graph is called as risk profile. The risk profile is a tool that is used to identify and measure the exposure of firm towards the financial risk. This tool is highly consistent with sensitivity analysis.

This tool considers two things such as the value of the firm and the prices of the services and the plotting relationship between the price of a product or service with the changes in the value of the firm enunciate how the firm’s value is affected by the price changes.

Conclusion

The graph that compares the value of the firm at different prices of the firm’s services is called as risk profile.

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