A Firm Is Considering the Decision of Investing in New

question 19

Multiple Choice

A firm is considering the decision of investing in new plants.The following is the profit payoff matrix under three conditions: it does not expand,it builds two new plants,or it builds one new plant.Three possible states of nature can exist--no change in the economy,the economy contracts and the economy grows.The firm has no idea of the probability of each state. What decision would be made using the maximin rule?

• A)no new plants
• B)one new plant
• C)two new plants
• D)not enough information to tell

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Definitions:

Decrease In Assets

A reduction in the value or quantity of the resources owned by an entity.

Increase Accounts Payable

An action reflecting a rise in the amount owed by a company to its creditors for goods or services received but not yet paid for.

Accounts Payable

Short-term liabilities representing amounts owed by a business to suppliers or creditors for goods and services purchased on credit.

Merchandise Inventory

The total value of a company's goods that are available for sale to customers.