A Decision Tree Indicates a 30% Chance of Making a $250,000

question 19

Multiple Choice

A decision tree indicates a 30% chance of making a $250,000 profit and a 70% chance of sustaining a $140,000 loss. Given this, the project should be:

• A) accepted because the amount of potential profit exceeds the amount of potential loss.
• B) rejected because there is more than a 50% chance of loss.
• C) accepted because the expected value is positive before discounting.
• D)rejected because the expected value is negative before discounting.

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Definitions:

Functions

Refers to the roles, activities, or duties that are intended or expected to be performed by a person, system, or object.

Cash

Money in the form of bills or coins; physical currency that is used as a medium of exchange.

Assignment

A process by which one party transfers rights, duties, or property to another.

Promissory Note

A financial instrument in which one party promises in writing to pay a determinate sum of money to another, either at a fixed or determinable future time or on demand of the payee.