单选题

Ultimately,thevalueofanyinvestmentist...

Question

Ultimately, the value of any investment is the present value of the future cash flows - Net Present Value (NPV) - that the investment is expected to generate. Therefore, it is necessary to forecast the economic cash flows and discount them appropriately to allow for the fact that they will not be received until sometime in the future. The NPV calculation always assumes the project is a success. However, there is a chance that no oil or gas is present (which is called “geological risk”). This must therefore be reflected in the valuation. This is achieved by assigning probabilities to the values of successful and unsuccessful outcomes. The sum of these risked values is the Expected Monetary Value (EMV). Which of the following statements can be concluded from the data given in Table 1?

A. Of all projects in the portfolio, project F is the least favorable investment

B. In terms of EMV only, if NPV of Success of Project A is 10% higher, it would be more worthy to put an investment into than Project B

C. In terms of EMV only, AJ Gasoline Group should invest in Project C rather than Project D

D. The percentage of failure of Project F is very low because the exploration well lies in the government’s land property