Heading: Analyzing Risky Decisions

question 42

Multiple Choice

Heading: Analyzing Risky Decisions
**Reference: Use the decision tree along with the given probabilities to answer the next six questions
Probability Event A = 30% Probability Event B = 70%
Probability Event 1 = 58% Probability Event 2 = 42%
Probability of Event A given that Event 1 occurs = 16%
Probability of Event B given that Event 1 occurs = 84%
Probability of Event A given that Event 2 occurs = 50%
Probability of Event B given that Event 2 occurs = 50%

-*If the decision maker chooses Decision A and Event 1 occurs, which decision alternative should the decision maker choose at node D?

• A)Decision 1
• B)Decision 2
• C)Either Decision; they both have the same expected value.
• D)Neither Decision; more information is needed.

---

Definitions:

Monthly Loan Payment

A fixed payment amount made by a borrower to a lender at a specified date each calendar month.

Facility

A physical or virtual space configured to serve a specific purpose, such as manufacturing, storage, or office work.

Present Value

The current value of a future sum of money or stream of cash flows, given a specific rate of return.

Discount Rate

During discounted cash flow analysis, this is the rate employed to determine the present value of anticipated future cash flows.