If a Decision Tree Indicates an Expected NPV of $1

question 81

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:

Residual Value

The estimated amount that an asset will be worth at the end of its useful life, after depreciation has been subtracted.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time due to use and wear and tear.

Accounting Principles

Rules and conventions that guide the accounting practices and financial reporting of businesses.