When Using Simulation to Analyze a Large Capital Project,the Decision

question 23

Multiple Choice

When using simulation to analyze a large capital project,the decision rule is

• A)there is no clear cut decision rule,but the probabilities will produce a more informed decision.
• B)accept the project if the probability of a positive NPV is greater than 50%.
• C)reject the project if the probability of a negative NPV is greater than 5%.
• D)reject the project if the probability of a negative NPV is greater than 16%

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Definitions:

Evaluating Results

The process of analyzing outcomes and performance against set goals or benchmarks to determine their success or areas for improvement.

Satisficing Decision

The choice of the first satisfactory alternative that comes to one’s attention.

Best Possible Solution

The optimal outcome or answer to a problem, which maximally satisfies the criteria or conditions set forth, often considering constraints and resources.

Satisficing Error

Occurs when decision-makers settle for a solution that is good enough rather than the optimal one, due to limitations in time, resources, or information.