​You Can Invest $100,000 into Either Project a or B

question 57

Multiple Choice

​You can invest $100,000 into either project A or B.You estimate that A would succeed with a probability of 0.5 in which case it doubles in value.If it fails,its scrap value is $50,000.Project B would succeed with probability 0.8,in which case it would have a value of $150,000.If it fails,project B's scrap value is $30,000.Which project should you invest in?

• A)​Project A
• B)Project B
• C)Neither of the projects
• D)​You cannot tell from the information presented

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Definitions:

Price-Elastic

A term that describes how sensitive the demand for a good or service is to changes in its price; high elasticity means demand changes significantly with price changes.

Microsoft

A multinational technology company known for its software products, including the Windows operating system and the Office suite.

Linear Demand Curve

A straight-line graphical representation showing the inverse relationship between the price of an item and the quantity demanded.

Total Revenue

The total income generated by a company from its sales of goods or services before any costs are subtracted.