You Are Given a Job to Make a Decision on Project

question 53

Multiple Choice

You are given a job to make a decision on project X, which is composed of three independent projects A, B, and C that have NPVs of + $70, -$40 and + $100, respectively. How would you go about making the decision about whether to accept or reject the project?

• A)Accept project X as it has a positive NPV.
• B)Reject project X.
• C)Break up the project into its components: Accept A and C, but reject B.
• D)Break up the project into its components: Accept C.

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Definitions:

Normal Model

A statistical model that assumes the dataset follows a normal distribution, often used in various statistical analyses.

Probability

Probability is a measure of the likelihood that a particular event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Poisson Approximation

A mathematical method for estimating the likelihood of a certain number of occurrences taking place within a set time period.

Uniform Density

A type of distribution in which all outcomes are equally likely within a specified range, characterized by a constant probability density function.