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%

Question

Quizplus · Accepted Answer

Simulation is a valuable tool for analyzing capital projects, but it cannot provide a clear-cut decision rule. Instead, simulation provides probabilities that can inform decision-making. Therefore, the best choice is A, which acknowledges that simulation results will provide more informed decision-making but cannot provide a definitive decision rule. Choices B, C, and D are too prescriptive and do not take into account the complexity and uncertainty of capital projects.

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