In a Decision Tree, Caution Should Be Used in the Analysis

question 83

Multiple Choice

In a decision tree, caution should be used in the analysis because:

• A)early stage decisions are probably riskier and should not likely use the same discount rate.
• B)if a negative NPV is actually occurring, management should opt out of the project and minimize the firm's loss.
• C)decision trees are only used for financial planning.
• D)Both A and C.
• E)Both A and B.

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Definitions:

Rates

Quantitative measures that represent a relationship between two quantities, showing how one quantity changes in relation to another.

Frequency

The frequency of a periodic event happening within a specified time interval.

Decibels

A unit of measurement for sound intensity, often used to describe the loudness of noises and sounds in the environment.

Hertz

A unit of frequency in the International System of Units (SI), indicating the number of cycles per second.