A risk-neutral person will invest in a project by examining if
A) the expected utility associated with the project is positive.
B) the marginal utility associated with the project is positive.
C) the expected net present value is positive.
D) All of the above.

Question

Quizplus · Accepted Answer

A risk-neutral person is only concerned with the expected monetary outcome of the project, not how the outcome will affect their utility or happiness. Therefore, the decision to invest in a project will be based on whether the expected net present value (NPV) is positive or not. Positive expected NPV means that the project is likely to yield more revenue than the investment cost, which is a desirable outcome for a risk-neutral investor.

A Risk-Neutral Person Will Invest in a Project by Examining