According to decision-tree analysis,investment projects should be discontinued when:
A) the probability of success is less than 50%.
B) NPV is calculated to be negative.
C) DOL increases from previous levels.
D) the possibility of a failing outcome exists.

Question

Quizplus · Accepted Answer

The decision-tree analysis recommends discontinuation of investment projects when the NPV value is negative. This is because a negative NPV implies that the investment project is not generating sufficient cash flows to cover the cost of the initial investment, and it is better to cut losses and allocate resources to other investment opportunities. The other options provided do not necessarily indicate that the investment project should be discontinued.

According to Decision-Tree Analysis,investment Projects Should Be Discontinued When