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

question 18

Multiple Choice

When using simulation to analyse 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:

Liable

Being legally responsible for a particular act or omission, usually involving payment of damages or compliance with specific court orders.

Suretyship

A contractual agreement in which one party (surety) guarantees the obligations of a principal to a third party.

Guaranty

Guaranty is a legal commitment by a guarantor to pay a debt or perform an obligation if the original debtor fails to do so.

Cosigner

An individual who agrees to be equally responsible for the repayment of a loan if the primary borrower fails to pay.