Figure 12-2
ZX Company is faced with choosing from the following four mutually exclusive alternatives. Each project has the same duration and the cash flows are expected to occur at the same point in time. Their net cash inflows will be determined by the prevailing market conditions. The forecast net cash inflows and their associated probabilities are shown below:
-Refer to Figure 12-2. The expected value of Project D is:
A) £472,000.
B) £480,000.
C) £477,600.
D) None of the above.

Question

Figure 12-2
ZX Company is faced with choosing from the following four mutually exclusive alternatives. Each project has the same duration and the cash flows are expected to occur at the same point in time. Their net cash inflows will be determined by the prevailing market conditions. The forecast net cash inflows and their associated probabilities are shown below: 
-Refer to Figure 12-2. The expected value of Project D is:
A) £472,000. 
B) £480,000. 
C) £477,600. 
D) None of the above.

Quizplus · Accepted Answer

The expected value of Project D is calculated by multiplying each possible outcome by its probability and summing the results. The correct calculation leads to £477,600.

Figure 12-2 ZX Company Is Faced with Choosing from the Following Four