Project Alpha Has an NPV of $10 Million and a Standard

question 112

Multiple Choice

Project Alpha has an NPV of $10 million and a standard deviation based on risk analysis of $3 million. Project Beta has an NPV of $8 million and a standard deviation based on risk of $2 million. Which project should be selected and why?

• A)Select Alpha because it has the higher NPV.
• B)Select Beta because it has the lower risk as represented by standard deviation.
• C)Select either project because both have positive NPVs and relatively low risk compared to their NPVs.
• D)Don't select either project because there is too much risk associated with both projects.
• E)There is no clear decision rule, the choice depends on management's degree of risk aversion.

Explore the role of management accountants in advancing sustainability through cost management and performance measures in supply chains.

Understand the different costs associated with quality and their impact on the production process.

Identify and differentiate between internal and external failure costs and their implications for business.

Grasp the concepts of quality of design and quality of conformance in relation to product standards.

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Definitions:

HMO

Health Maintenance Organization, a medical insurance group that provides health services for a fixed annual fee.

Expected Revenue

The anticipated amount of money a business expects to receive over a certain period, accounting for factors like price and demand for its goods or services.

Subjective Probabilities

Probability estimates based on personal judgment or belief rather than objective statistical analysis.

Economic Consultants

Professionals who provide expert advice on economic strategies, market analysis, policy assessment, and economic forecasting to businesses or government entities.