Project Alpha Has an NPV of $10 Million and a Standard

question 112

Multiple Choice

Project Alpha has an NPV of $10 million and a standard deviation based on risk analysis of $3 million. Project Beta has an NPV of $8 million and a standard deviation based on risk of $2 million. Which project should be selected and why?

• A)Select Alpha because it has the higher NPV.
• B)Select Beta because it has the lower risk as represented by standard deviation.
• C)Select either project because both have positive NPVs and relatively low risk compared to their NPVs.
• D)Don't select either project because there is too much risk associated with both projects.
• E)There is no clear decision rule, the choice depends on management's degree of risk aversion.

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Definitions:

Preventive Safety

Measures and practices implemented to reduce the risk of accidents, injuries, or other adverse events before they occur.

Eliminating Distractions

A process of removing factors that divert attention from tasks or objectives.

Communicable Disease

An infectious disease that can be transmitted from person to person or through vectors.

Infectious Disease

Diseases caused by pathogens such as bacteria, viruses, fungi or parasites, and can spread directly or indirectly from one person to another.