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Starting Right

The document is a case study involving investment recommendations for different potential investors in a startup company called Starting Right Corporation. It includes: 1) Details about 6 potential investors with different risk profiles and beliefs about the company's chances of success. 2) Recommendations for each investor based on their risk attitude, using decision analysis techniques like maximin and expected value. 3) Advice that the company founder Julia Day can eliminate the preferred stock investment option while still offering choices that satisfy both risk seeking and risk avoiding investors.

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Richie Donato
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251 views2 pages

Starting Right

The document is a case study involving investment recommendations for different potential investors in a startup company called Starting Right Corporation. It includes: 1) Details about 6 potential investors with different risk profiles and beliefs about the company's chances of success. 2) Recommendations for each investor based on their risk attitude, using decision analysis techniques like maximin and expected value. 3) Advice that the company founder Julia Day can eliminate the preferred stock investment option while still offering choices that satisfy both risk seeking and risk avoiding investors.

Uploaded by

Richie Donato
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Quantitative Methods for Business

4:00 p.m to 7:00 p.m (Room E209)

Group Members:
1. Millana, Jezreel Jeanne
2. Palmera, Samantha
3. Donato, Richie
4. Infante, Kenneth
5. Trogillo, Jemar

Starting Right Corporation

“Decision Analysis Table”

1. Sue Pansky, a retired elementary school teacher, is considering investing in Starting Right. She is very conservative and is a risk avoider.
What do you recommend?

Since Sue Pansky is a risk avoider she should use the maximin decision approach. With this, she should do nothing and not
make an investment in the company.

2. Ray Cahn, who is currently a commodities broker, is also considering an investment, although he believes that there is only an 11% chance
of success. What do you recommend?

Ray Cahn should Do nothing since we used the .11 success probability. He will just incur losses if he invested.

3. Lila Battle has decided to invest in Starting Right. While she believes that Julia has a good chance of being successful, Lila is a risk avoider
and very conservative. What is your advice to Lila?

Lila Battle should eliminate option of doing nothing and apply the maximin criterion. The result is to invest in
the corporate bonds.
4. George Yates believes that there is an equally likely chance for success. What is your recommendation?

I would recommend that Mr. Yates should invest in Common Stocks since using the method of equally likely the result is good
which is 105,000 dollars.

5. Peter Metarko is extremely optimistic about the market for the new baby food. What is your advice for Pete?

Since Mr. Metarko is extremely optimistic I would recommend that he should invest in common stock since it has a good return
which is 240,000 dollars

6. Julia Day has been told that developing the legal documents for each fundraising alternative is expensive. Julia
would like to offer alternatives for both risk-averse and risk-seeking investors. Can Julia delete one of the financial
alternatives and still offer investment choices for risk seekers and risk avoiders?

Julia can eliminate the preferred stock alternative and still offer common stock and doing nothing or investing in corporate
bonds.

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