Xander Inc

question 8

Multiple Choice

Xander Inc. has prepared the following sensitivity analysis: In addition, it has assigned the following likelihoods to the three possible annual net cash flows: $500,000, 70%; $600,000, 20%; and $700,000, 10%. Based on an expected value analysis, which of the following statements is accurate?

• A)The expected value of the annual net cash flow is $540,000, and the project should be rejected.
• B)The expected value of the annual net cash flow is $540,000, and the project should be accepted.
• C)The expected value of the annual net cash flow is $660,000, and the project should be rejected.
• D)The expected value of the annual net cash flow is $660,000, and the project should be accepted.

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Definitions:

Disaffirmance

The legal right of a minor to void contracts or agreements entered into, under specific conditions.

Contractual Capacity

The legal ability of a person or entity to enter into a contract.

Ratify

To formally approve or confirm an agreement, treaty, or action, making it officially valid.

Disaffirm

To disaffirm means to officially reject, deny, or renounce a contract or agreement, especially by a minor or someone not fully competent.