Richmond Graphics Is a Small Company Contemplating a Project with a $5M

question 80

Multiple Choice

Richmond Graphics is a small company contemplating a project with a $5M initial investment. A traditional capital budgeting analysis shows the project to have an NPV of $3.3M. However, a simple decision tree analysis reveals that the project has a 90% probability of an NPV of $4.0M and a 10 % chance of a ($3.0M) loss NPV. Management should probably:

• A)accept the project because its traditional NPV is positive.
• B)accept the project even though there is some risk because the overwhelming likelihood is that the outcome will be favorable.
• C)reject the project because it has some risk.
• D)reject the project because it entails a fairly good chance of a loss that could ruin a small company coupled with a likely gain that isn't very large.

---

Definitions:

Work-Related Situation

Refers to any circumstance, task, or event that occurs in the professional or work setting, impacting the behavior and performance of individuals or groups.

Mobilization Strategies

Methods or plans designed to assemble, organize, and deploy resources or people towards achieving specific goals, especially in social or political contexts.

Capacity-building Strategies

Approaches or methods aimed at developing skills, abilities, and competencies in an individual, organization, or community to increase performance and achieve goals.

Social Action Strategies

Plans of action designed to address social issues and affect societal change.