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Consider the following equally likely project outcomes: Profit X Y Pessimistic prediction $ 0 $ 5 0 0 Expected outcome $ 5 0 0 $
Consider the following equally likely project outcomes:
Profit
X Y
Pessimistic prediction $ $
Expected outcome $ $
Optimistic prediction $ $
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Part
A
Investors will reject both projects because the profit is too low.
B
Investors will prefer project X because it potentially offers a higher profit.
C
Since Projects X and Y have the same expected outcomes of $ investors will view them as identical in value.
D
Investors will prefer project Y because the expected return is the same as for project X but the outcome is certain.
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