Which of the Following Statements Are True

question 42

Multiple Choice

Which of the following statements are true?

• A)Sensitivity analysis is a process of seeing how optimal decision and EMV vary when one or more inputs vary.
• B)Multistage decision problem is one where decisions and observations of uncertain outcomes alternate.
• C)Contingency plan is a strategy in a multistage decision problem that specifies which decision to make for each possible outcome.
• D)All of these choices are true.

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Definitions:

NPV

NPV (Net Present Value) is a financial metric that calculates the present value of expected future cash flows of an investment, subtracting the initial investment cost.

Initial Cash Outflow

The initial amount of money paid out or expended, typically for an investment or purchase, before any returns are considered.

Required Return

The minimum rate of return an investor expects to achieve by investing in a particular asset or project.

Required Rate

The least yearly interest rate that persuades individuals or entities to dedicate capital to a distinct project or investment opportunity.