Question

when using expected value analysis, assigning probabilities to the various outcomes incorporates ______
○ a. the internal rate of return
○ b. uncertainty
○ c. the net present value
○ d. break - even analysis

Explanation:

• Option a: Internal rate of return (IRR) is about discounting cash flows to find a rate, not related to assigning probabilities in expected value analysis.
• Option b: Expected value analysis uses probabilities to account for the uncertainty of different outcomes (since outcomes may not be certain, probabilities reflect the likelihood of each, incorporating uncertainty).
• Option c: Net present value (NPV) is a valuation method, not related to assigning probabilities for expected value.
• Option d: Break - even analysis is about finding the point where costs equal revenue, not about probability assignment in expected value.

Answer:

b. uncertainty