I have provided details regarding possible scenarios and need help figuring out which one to choose. Please help me determine which scenario would be best.© BrainMass Inc. brainmass.com April 3, 2020, 10:05 pm ad1c9bdddf
Management has set a MARR at 12%. The only scenario where a lower return could occur is if sales decrease and price decreases, both by 5%. This scenario would put them below their MARR at a internal rate of return of 5.6%.
The probabilities for each scenario are not given, so I assume they want you to calculate them. Each scenario has a corresponding probability, so we need to set up an expected value equation for the sum of all probabilities and set it equal to our constraint of 12%. We are trying to find out what the highest probability of the decrease, decrease scenario is without ...
This solution presents an expected value equation for the sum of all probabilities and sets it equal to our constraint of 12%.