What Is the EMV for Option 1 in the Following

question 40

Multiple Choice

What is the EMV for Option 1 in the following decision table?
$$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~{ \text { States of Nature } } \\\begin{array} { | l | c | c | } \hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \\\hline \mathrm { p } & .4 & .6 \\\hline \text { Option 1 } & 10,000 & 30,000 \\\hline \text { Option 2 } & 5,000 & 45,000 \\\hline \text { Option 3 } & -4,000 & 60,000 \\\hline\end{array}$$

• A) 10,000
• B) 18,000
• C) 20,000
• D) 22,000
• E) 30,000

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Definitions:

Cash Inflows

The total amount of money being transferred into an entity, coming from various sources like sales, financing, or investments.

Financially Attractive

A term used to describe investments or opportunities that are likely to provide a good financial return.

Internal Rate

Often refers to the internal rate of return (IRR), which is a discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Return

The amount of profit or loss gained from an investment relative to its initial cost.