33. CSO: 1A2e LOS: 1A2i
Scarf Corporation’s controller has decided to use a decision model to cope with
uncertainty. With a particular proposal, currently under consideration, Scarf has two
possible actions, invest or not invest in a joint venture with an international firm. The
controller has determined the following.
Action 1: Invest in the Joint Venture
Events and Probabilities:
Probability of success = 60%.
Cost of investment = $9.5 million.
Cash flow if investment is successful = $15.0 million.
Cash flow if investment is unsuccessful = $2.0 million.
Additional costs to be paid = $0
Costs incurred up to this point = $650,000.
11
Action 2: Do Not Invest in the Joint Venture
Events
Additional costs to be paid = $100,000.
Which one of the following alternatives correctly reflects the respective expected values
of investing versus not investing?
a. $300,000 and $(750,000).
b. $(350,000) and $(100,000).
c. $300,000 and (100,000).
d. $(350,000) and $(750,000).
Bạn đang xem 33. - CMA EXAM SUPPORT PACKAGE 1
