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Below You Are Given a Profit Payoff Table Involving Three

question 14

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Below you are given a profit payoff table involving three decision alternatives and three states of nature. Below you are given a profit payoff table involving three decision alternatives and three states of nature.   ​ The probability of occurrence of s<sub>1</sub> is .1 and the probability of occurrence of s<sub>2</sub> is .3. The expected value of alternative C is A)  30.0. B)  6.5. C)  3. D)  5.5. ​ The probability of occurrence of s1 is .1 and the probability of occurrence of s2 is .3.
The expected value of alternative C is

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Definitions:

Discount Rate

It’s the interest rate used in the process of discounted cash flow analysis to evaluate the present value of anticipated future cash flows.

Required Return

The basic annual percent yield needed to appeal to individuals or businesses for investment in a specific project or security.

Cash Flows

The gross flow of cash and assets equivalent to cash moving into and away from a business operation.

Payback Period

Payback period is the amount of time it takes for an investment to generate an amount of cash flow equal to the original investment amount.

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