A Decision Tree Shows a 30 Percent Probability of $2

question 107

Multiple Choice

A decision tree shows a 30 percent probability of $2 million in returns and a 70 percent chance of $1 million in returns.What is the maximum you would invest today in this project if the cash in-flow occurs one year in the future and the discount rate is 10 percent?

• A)$818,182
• B)$1,181,818
• C)$1,300,000
• D)$1,363,636 NPV = - investment
• 0 = - investment

---

Definitions:

100,000 Hz

A frequency unit representing 100,000 cycles per second in the electromagnetic spectrum, typically associated with high-frequency sounds beyond human hearing.

Opponent-Process Theory

A psychological and neurological model explaining how the perception of one stimulus (e.g., color) can affect the perception of another, leading to contrasting effects.

Color Pairings

The practice of combining colors based on their harmony and contrast to achieve a particular aesthetic or functional effect, often used in design and art.

Amplitude

The height or intensity of a wave, often used in contexts such as sound waves, which correlates with volume or loudness.