Which of the Following Is an Advantage of the Certainty

question 85

Multiple Choice

Which of the following is an advantage of the certainty equivalent approach?

• A)It allows decision makers to recognize particularly risky years.
• B)It uses the cost of capital as the appropriate discount rate which is easier to calculate.
• C)It uses regression analysis which gives a certain estimate of cash flows.
• D)It uses computer simulation methods which makes a precise prediction of cash flows.

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Definitions:

Domestic Opportunity Cost

The cost of forgoing the next best alternative use of a country's own resources.

Comparative Advantage

The principle that countries or entities should produce goods and services where they have a lower opportunity cost compared to others.

Domestic Opportunity Cost

The cost of forgoing the next best alternative when choosing to produce a good or service domestically.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity.