Nimbus Energy is assessing the possibility of a failure of a…
Nimbus Energy is assessing the possibility of a failure of a critical piece of equipment at its Sarasota, FL power plant; and the corresponding losses that the equipment failures would cause. After performing a quantitative analysis of the company’s historical information in regards to equipment failures, the Risk Manager of Nimbus Energy derived the following information: Outcome Probability Loss ($$$) No Equipment Failure 0.70 $0 Minor Equipment Failure 0.20 $100,000 Moderate Equipment Failure 0.095 $250,000 Major Equipment Failure 0.005 $1,500,000 Question #1: What is the Expected Value (Loss) for the failure of a piece of critical equipment at Nimbus Energy’s – Sarasota, FL plant? = [choice1] Question #2: The Risk Manager wants to compare the risk between the company’s Sarasota, FL power plant and the company’s largest power plant in Tampa, FL. After performing even further quantitative analysis, the Risk Manager of Nimbus Energy derived the following information about the two power plants: Sarasota, FL Power Plant: Expected Value (Loss) = calculated above in Question #1 Standard Deviation = $128,125 Tampa, FL Power Plant: Expected Value (Loss) = $225,000 Standard Deviation = $398,775 Which one of the two power plants poses MORE risk (uncertainty) of equipment failure; as determined by the most critical objective measure of risk? (or worded another way the equalizing measure of dispersion) And what is the numerical value of the most critical objective measure of risk? = [choice2]
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