A Decision Tree Shows a 30 Percent Probability of $2

question 59

Multiple Choice

A decision tree shows a 30 percent probability of $2 million in returns and a 70 percent chance of $1 million in returns.What is the maximum you would invest today in this project if the cash in-flow occurs one year in the future and the discount rate is 10 percent? (Use the values in dollar)

• A)$818,182
• B)$1,181,818
• C)$1,300,000
• D)$1,363,636

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Definitions:

Average Tax Rate

The ratio of total taxes paid to total taxable income, representing the percentage of income that goes towards taxes.

Taxable Income

The amount of an individual's or a company's income used to determine how much tax they owe to the government in a given tax year.

Income Tax

A tax levied by governments on individuals or entities' income. The rate can vary based on the level of income earned.

Regressive

Describing a tax system in which the tax rate decreases as the taxable amount increases, often placing a higher burden on lower-income individuals.