Use the following information to answer questions 13 - 15
The following data is on two one period capital projects.
-What is the expected value of each project's cash flow?
A) A = 630, B = 640
B) A = 640, B = 630
C) A = 3200, B = 3100
D) A = 3100, B = 3200
E) None of the above

Question

Use the following information to answer questions 13 - 15
The following data is on two one period capital projects. 
-What is the expected value of each project's cash flow?
A) A = 630, B = 640 
B) A = 640, B = 630 
C) A = 3200, B = 3100 
D) A = 3100, B = 3200 
E) None of the above

Quizplus · Accepted Answer

The expected value of a project's cash flow is the sum of the products of the possible cash flows and their probabilities. For project A, the expected value is (0.2 * 3000) + (0.8 * 600) = 630. For project B, the expected value is (0.3 * 2000) + (0.7 * 800) = 640.

Use the Following Information to Answer Questions 13 - 15