Richardson Supplies Has Run a Simulation on a Large Project

question 49

Multiple Choice

Richardson Supplies 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:

Winter

The coldest season of the year in polar and temperate climates, characterized by short days, long nights, and typically featuring snow, ice, and freezing temperatures.

Biological Clock

An internal mechanism in organisms that controls the cycle of biological processes and behaviors in a roughly 24-hour cycle, known as the circadian rhythm.

Hypothalamus

A region of the brain that controls an immense number of bodily functions, including temperature regulation and thirst.

Circadian Rhythms

Biological processes that display an endogenous, entrainable oscillation of about 24 hours, regulating various physiological processes including the sleep-wake cycle.