Should Tangshan Mining Company Accept a New Project If Its

question 20

Multiple Choice

Should Tangshan Mining company accept a new project if its maximum payback is 3.5 years and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $700,000 in year 3 and $1,800,000 in year 4?

• A) Yes.
• B) No.
• C) It depends.
• D) None of the above.

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Definitions:

Opportunity Loss Table

A table used in decision making that shows the loss of potential gain from not choosing the optimal action or decision.

Payoff Table

A tabular representation of the outcomes of different decisions or strategies under various states of nature or scenarios.

Expected Opportunity Loss

The anticipated loss for not choosing the best possible option or course of action in decision-making processes.

Expected Monetary Value

A statistical technique in decision making used to calculate the average outcome when the future includes scenarios that may or may not happen.