Need of investing some of its liquidity

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Reference no: EM133483280

Question: BM Plc have seen some fantastic years and is in need of investing some of its liquidity. Mrs Brown have found two companies that she thinks fit within the frame of the company's requirements for investments. The first is Tudor and this company is operating as distributer of fertilizers. This business is relatively stable and is expected to deliver a return on investment of -4% in bad times and 20% in good times. The probability for good times for Tudor is 55%.

The second company is Blake and this is a different operation but the opportunities for high yield is really god. In good times it is expected to deliver a return of 25% however in bad times it will deliver -8%. The probability for a bad year for Blake is 50%.

Mr Johnsson has looked into the matter and decided for investing in either of the companies or a combination of 60% in Blake and 40% in Tudor. John Ballwin got this task in his lap and is completely lost. Please help John with a proper analyse of this opportunity and give him a qualitative statement to be delivered to Mrs Brown and Mr Johnson. The statement should cover all investments and discuss pros and cons.

Reference no: EM133483280

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