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

question 66

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:

Emerging Innovations

New developments or technologies that are on the verge of becoming widely known or used.

Creative Potential

The inherent capacity or possibility within a person to think creatively or come up with new and innovative ideas.

Sunk-cost Fallacy

The misconception of valuing ongoing investments based on previously spent resources rather than future benefits, often leading to irrational decision-making.

Development

The process of growth, progress, or evolution, often involving improvement in abilities, knowledge, or understanding.