If a decision tree indicates an expected NPV of $1 million, then:
A) at least one of the outcomes had a negative NPV.
B) all of the outcomes had a positive NPV.
C) $1 million is the firm's minimum guaranteed profit.
D)the project still contains uncertainty.

Question

Quizplus · Accepted Answer

The decision tree indicating an expected NPV of $1 million suggests that the project has some level of uncertainty. It does not necessarily mean that all of the outcomes had a positive NPV or that $1 million is the firm's minimum guaranteed profit. Therefore, option D is the correct answer.

If a Decision Tree Indicates an Expected NPV of $1