In a decision tree, the NPV to make the yes/no decision is dependent on:
A) only the cash flows from successful path.
B) on the path where the probabilities add up to one.
C) all cash flows and probabilities.
D) only the cash flows and probabilities of the successful path.

Question

Quizplus · Accepted Answer

The NPV in a decision tree accounts for all cash flows and their associated probabilities, not just those from successful outcomes. This includes both positive and negative cash flows along different paths, as each path's outcome contributes to the overall expected value of the project.

In a Decision Tree, the NPV to Make the Yes/no