Cranston Plastic Packaging Solutions Has Run a Simulation on a Large

question 30

Multiple Choice

Cranston Plastic Packaging Solutions has run a simulation on a large project to produce eco-friendly packaging for personal hygiene products. The mean NPV is an impressive $8,000,000, but there is a 16% probability of a negative NPV and a 5% probability of an NPV worse than ($6,000,000) .

• A) Cranston should reject the project. It is too risky.
• B) Cranston should accept the project. The odds are in their favor.
• C) Cranston should explore options to reduce the likelihood of very unfavorable outcomes.
• D) Cranston should change the probabilities used in the simulation to reduce the likelihood of a negative NPV.

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Definitions:

Money Multiplier

A factor that quantifies the amount of money the banking system generates with each unit of reserves.

Bonds

Financial securities that represent loans made by investors to issuers, typically governments or corporations, which promise to pay back the principal along with interest on specific dates.

Money Supply

The money supply refers to the total amount of monetary assets available in an economy at a specific time, including cash and deposits.

Leverage Ratio

A leverage ratio is a financial metric used to measure the level of debt used by a business in relation to its equity or assets, indicating the financial health and risk of the entity.