Consider this decision tree,which represents the outcomes of two alternative projects that Ink Inc.,a producer of printers,might pursue.Ink Inc.,needs to borrow $1,000 to pursue either project and is going to sell bonds to finance the venture.
Ink,Inc.,is carrying a large amount of debt because of overexpansion during the dot-com explosion.Under these circumstances,the shareholders would tend to choose:
A) project A, because it has the highest expected value.
B) project B, because it has the greatest degree of risk.
C) project A, because it has the lowest degree of risk.
D) neither project A nor B, because both are risky.
E) either project A or B; both have the same degree of risk.

Question

Consider this decision tree,which represents the outcomes of two alternative projects that Ink Inc.,a producer of printers,might pursue.Ink Inc.,needs to borrow $1,000 to pursue either project and is going to sell bonds to finance the venture. 
Ink,Inc.,is carrying a large amount of debt because of overexpansion during the dot-com explosion.Under these circumstances,the shareholders would tend to choose:
A) project A, because it has the highest expected value. 
B) project B, because it has the greatest degree of risk. 
C) project A, because it has the lowest degree of risk. 
D) neither project A nor B, because both are risky. 
E) either project A or B; both have the same degree of risk.

Quizplus · Accepted Answer

The Answer of Consider this decision tree,which represents the outcomes of two alternative projects that Ink Inc.,a producer of printers,might pursue.Ink Inc.,needs to borrow $1,000 to pursue either project and is going to sell bonds to finance the venture. 
Ink,Inc.,is carrying a large amount of debt because of overexpansion during the dot-com explosion.Under these circumstances,the shareholders would tend to choose:
A) project A, because it has the highest expected value. 
B) project B, because it has the greatest degree of risk. 
C) project A, because it has the lowest degree of risk. 
D) neither project A nor B, because both are risky. 
E) either project A or B; both have the same degree of risk.

Consider This Decision Tree,which Represents the Outcomes of Two Alternative