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Question
As president and CEO of MegaWorld industries, you must decide on some very risky alternative investments:| Project | Profit if Successful | Probability of Success | Loss if Failure | Probability of Failure |
| A | $10 million | .5 | -$6 million | .5 |
| B | $50 million | .2 | -$4 million | .8 |
| C | $90 million | .1 | -$10 million | .9 |
| D | $20 million | .8 | -$50 million | .2 |
| E | $15 million | .4 | $0 | .6 |
The highest expected return belongs to investment
A) A.
B) B.
C) C.
D) D.
Answer
This answer is hidden. It contains 1 characters.
Related questions
Q:
The Clemson Manufacturing Corp. engineers have estimated that a new factory can be constructed for the manufacture of hydraulic valves and fittings. Two different technologies, A and B, have been considered in the manufacturing process. The costs of the factory and annual earnings are given below for both technologies. Capital Costs Earnings (in $millions) (in $millions) End of the Year A B A B 0 $10 $15 $0 $0 1 10 10 -1 0 2 10 0 1 2 3 0 0 5 10 4 0 0 10 10 5 0 0 20 10At the end of five years, technology A will have a scrap value of one million dollars, and technology B will have a scrap value of 5 million dollars. Assume that these two projects are equally risky and the appropriate discount rate is 10 percent per year. Calculate the net present value of each of these factories. Determine if either or both would be feasible. Does it matter whether or not real or nominal terms are used for capital costs, cash flows, and discount rate? Explain.
Q:
Your firm is evaluating a potential investment in new machinery, but the manager in charge of the project uses an opportunity cost of capital that is too large. How does this error affect the projected net present value of the firm's investment?
A) NPV is overstated
B) NPV is understated
C) NPV is unaffected
D) NPV changes from positive to negative
Q:
For net present value calculations, the rate of return that one could earn by investing in another project with similar risk is known as the:
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B) nominal interest rate.
C) prime interest rate.
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Q:
If the inflation rate falls and nominal interest rates are unchanged,
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B) inflation will continue at the same rate.
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If an individual has $10,000 in a savings account paying 3% and the inflation rate is 2%, the nominal interest rate is
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Q:
The real interest rate is
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B) the nominal rate minus the rate of inflation.
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Q:
The first term in an NPV calculation is usually
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C) zero, because interest charges do not accrue until the second period.
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Q:
The "NPV Criterion" is that a firm should invest in a new capital project if
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C) financing can be secured on the basis of new bonds.
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Q:
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Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers, and both groups of workers initially earn the perfectly competitive wage. What happens to the equilibrium employment level and wage for non-union workers if the union exercises its bargaining power?
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Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers, and both groups of workers initially earn the perfectly competitive wage. What happens to the equilibrium employment level and wage for union workers if the union exercises its bargaining power?
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Q:
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Q:
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A) No one
B) Everyone
C) The last factor of production hired
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E) Only owners of physical properties earn economic rents
Q:
Scenario 14.4:
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TP = 100L - 0.125L2 MP = 100 - 0.25L
where L is the amount of labor employed. The supply curve for labor and the marginal expenditure curve for labor are given as follows:
L = PL -5 MEL = 2L + 5
Refer to Scenario 14.4. Suppose that a tax is imposed on each unit of the product that John produces. Which curve will shift?
A) Marginal product of labor
B) Marginal revenue product of labor
C) The supply of labor
D) All of the above will shift due to the tax on output.
Q:
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Q:
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C) Rents decrease
D) Rents are zero before and after the change
Q:
Under an upward sloping supply curve for land, the economic rents to land ________ as the demand for land shifts rightward.
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D) We do not have enough information to answer this question.
Q:
Which of the following is NOT true about the supply of labor to the firm in a competitive labor market?
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Q:
Use the following statements to answer this question:
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C) II is true and I is false.
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Q:
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Q:
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Q:
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Q:
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A) can increase profit by reducing the employment of the factor of production.
B) is now maximizing profit.
C) should not use this factor of production because it has no potential in generating a profit.
D) can increase profit by expanding the employment of the factor of production.
Q:
An increase in technology that enhances labor productivity will likely result in:
A) a decrease in labor employment and an increase in the wage rate.
B) an increase in labor employment and an increase in the wage rate.
C) a decrease in labor employment and a decrease in the wage rate.
D) an increase in labor employment and a decrease in the wage rate.
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Q:
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Q:
If leisure is a normal good, then the income effect of a decrease in wage will
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D) increase the sum of leisure plus hours worked.
Q:
The marginal revenue product can be expressed as the
A) additional revenue received from selling one more unit of product.
B) increment to revenue received from one additional unit of input hired.
C) marginal physical product of an input times the average revenue received from the sale of the product.
D) average physical product of the input times the marginal revenue received from the sale of the final product.