According to the Net Present Value Rule, an Investment Should

question 16

Multiple Choice

According to the net present value rule, an investment should be made if:

• A) the net present value has no risk.
• B) the net present value is greater than the cost of investment.
• C) the net present value is less than present value.
• D) the net present value is more desired than consumption.
• E) the net present value is positive.

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Definitions:

Conditional Probability

This is the probability of an event occurring given that another event has already occurred.

Expected Value

A statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen, often used in decision-making and risk assessment.

Outcome

The result or consequence of an action, process, or situation, typically measured against expected or intended objectives.

Expected Monetary Value

A statistical concept used to calculate the average outcome when the future includes scenarios that may or may not happen.