You Are a Hotel Manager and You Are Considering Four

question 57

Multiple Choice

You are a hotel manager and you are considering four projects that yield different payoffs,depending upon whether there is an economic boom or a recession.The potential payoffs and corresponding payoffs are summarized in the following table. $$\begin{array} { | l | l | l | } \hline \text { Praject } & \begin{array} { l } \text { Bamn } \\( 50 \% ) \end{array} & \begin{array} { l } \text { Recession } \\( 50 \% ) \end{array} \\\hline \text { A } & \$ 20 & - \$ 10 \\\hline \text { B } & - \$ 10 & \$ 20 \\\hline \text { C } & \$ 30 & - \$ 30 \\\hline \text { D } & \$ 50 & \$ 50 \\\hline\end{array}$$ Which project yields the greatest return,regardless of whether a boom or a recession occurs?

• A) A
• B) B
• C) C
• D) D

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Definitions:

Credit

An accounting entry that increases liabilities and equity, or decreases an asset or expense account, representing the opposite of a debit.

Sales Discounts

Reductions from the listed or invoice price of goods or services provided to customers, often used as an incentive for early payment.

Accounts Receivable

Funds that customers owe a company for products supplied or services rendered but have not yet been paid for.

Invoice Price

The price listed on an invoice, representing the amount the buyer agrees to pay the seller for goods or services provided.