Asked by Fanele Mthethwa on Sep 24, 2024
You can invest $100,000 into either project A or B.You estimate that A would succeed with a probability of 0.6 in which case it doubles in value.If it fails,its scrap value is $50,000.Project B would succeed with probability 0.7,in which case it would have a value of $150,000.If it fails,project B's scrap value is $30,000.Which project should you invest in
A) Project A
B) Project B
C) Neither of the projects
D) You cannot tell from the information presented
Invest
The act of allocating resources, usually money, in the expectation of generating an income or profit.
Scrap Value
The estimated resale value of an asset at the end of its useful life, typically in a condition where it can only be sold for parts or raw materials.
- Analyze and select between varied investment projects by calculating their anticipated values.
- Analyze the prospects of investments by considering their chances of success and the resultant value.
Learning Objectives
- Analyze and select between varied investment projects by calculating their anticipated values.
- Analyze the prospects of investments by considering their chances of success and the resultant value.