The Expected Value of Perfect Information (EVPI) Is the

question 95

Multiple Choice

The expected value of perfect information (EVPI) is the

• A) payoff for a decision made under perfect information
• B) payoff under minimum risk
• C) average expected payoff
• D) difference between the payoff under perfect information and the payoff under risk
• E) none of the above

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Definitions:

Discounted Payback

The period it takes for an investment to break even in cash flow terms, adjusted for the time value of money.

Required Return

The minimum gain or profit that investors expect to receive on an investment relative to its risk.

Average Accounting Rate

A financial metric that represents the average rate of return earned on investments or assets, based on accounting values.

Net Income

The total profit of a company after all expenses, including taxes and operational costs, have been deducted from total revenues.