Discuss some potential shortcomings of the standard decision tree analysis.
What will be an ideal response?
First, if there is differential risk at various stages of the tree then different discount rates should be applied to each stage. Second, the firm has more options than just accept or reject which are generally not reflected in the standard tree. These options include the options to delay, expand, contract, and abandon.
You might also like to view...
Cash flows to assets is measured in terms of
a. a percentage. b. times. c. days. d. dollars.
The officers of a corporation are responsible for overseeing the board of directors
Indicate whether the statement is true or false
The days' sales in receivables ratio indicates the number of days it takes to collect the average level of accounts receivable
Indicate whether the statement is true or false
[The following information applies to the questions displayed below.]The 4,000 accounts receivable of Miller Company have a total book value of $150,000. A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800.Using the ratio estimation technique, the estimated total audited value of the population is:
A. $154,000. B. $150,000. C. $152,000. D. $154,054.