William Is Considering the Following Offer: a 50% Chance of Winning

question 127

Multiple Choice

William is considering the following offer: a 50% chance of winning $10 and a 50% chance of losing $9.The expected value of this gamble is

• A) $10.
• B) $5.
• C) $1.50.
• D) $1.
• E) $0.50.

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Definitions:

Internal Growth Rates

The maximum rate at which a company can expand using only internal financial resources without resorting to borrowing or seeking new equity investment.

External Financing Needs (EFN)

The amount of funding a business requires from external sources to finance its planned growth or expansion activities.

Negative EFN

External Financing Needed; a scenario where a negative value indicates a surplus of funds, implying no external financing is required for growth or operations.

Retention Ratio

The proportion of net income that is retained in the business rather than paid out as dividends, indicating reinvestment rate.