A Firm Is Evaluating the Relative Riskiness of Two Capital $\text { Net Present Value }$

question 18

Multiple Choice

A firm is evaluating the relative riskiness of two capital budgeting projects. The following table summarizes the net present values and associated probabilities for various outcomes for the two projects.
$\text { Net Present Value }$

$\begin{array}{rrr}\text { Probability }&\text { Project A }&\text { Project B }\\\hline 0.25 & -\$ 5,000 & 0 \\0.50 & 4,000 & \$ 2,000 \\0.25 & 10,000 & 8,000\end{array}$
-The expected net present value for projects A and B are

• A) $4,000 and $1,500, respectively.
• B) $2,000 and $1,000, respectively.
• C) $3,000 and $3,300, respectively.
• D) $3,250 and $3,000, respectively.

---

Definitions:

Industry Weakness

Aspects or characteristics of an industry that represent disadvantages or vulnerabilities, potentially hindering its performance or growth.

Process Innovation

Involves the introduction or improvement of goods, services, or processes, enhancing effectiveness or efficiency.

Organize Business's Resources

The process of effectively allocating and managing an organization's assets, including human, financial, and physical resources, to achieve its objectives.

Greater Value

The higher worth or significance of something, often due to its usefulness, rarity, or quality.