A Simple Scoring Model Is Used to Decide Among Three

question 106

Multiple Choice

A simple scoring model is used to decide among three projects that we'll call A,B,and C.The total score for project A is 30,for project B is 20,and for project C is 10.Which of the following statements is best?

• A)If project A is successfully completed,it will yield three times the benefits that project C would have provided.
• B)If project C is chosen,the company would benefit only half as much as if they had chosen project B.
• C)Project C is better than project B for this company at this point in time.
• D)Project A is better than project B for this company at this point in time.

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Definitions:

Equity Tranche

The portion of a structured finance instrument that is first to absorb losses and last to receive payments.

Default

Failure to fulfill a legal obligation, especially failure to meet a debt payment or not fulfilling a contract condition.

Collateralized Debt Obligation

A complex structured finance product that pools together cash flow-generating assets and repackages them into tranches for sale to investors.

Credit Default Swap

A financial derivative or contract that allows an investor to "swap" or offset their credit risk with that of another investor.