# highest probability of the decrease

Hello,

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 ad1c9bdddfhttps://brainmass.com/economics/finance/highest-probability-decrease-419251

#### Solution Preview

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 ...

#### Solution Summary

This solution presents an expected value equation for the sum of all probabilities and sets it equal to our constraint of 12%.