If a Decision Tree Indicates an Expected NPV of $1

question 74

Multiple Choice

If a decision tree indicates an expected NPV of $1 million,then:

• A) at least one of the outcomes had a negative NPV.
• B) all of the outcomes had a positive NPV.
• C) $1 million Is the firm's minimum guaranteed profit.
• D) the project still contains uncertainty.

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Definitions:

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes in response to a change in price.

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand.

Tax Placed

The imposition of a financial charge or levy on an individual or a corporation by a government.

Deadweight Loss

A decline in economic efficiency resulting from the failure to achieve free market equilibrium for a good or service.