Problem:
You are at your desk at work when a co worker excitedly comes to your desk and shows you the scenario analysis that he has just completed for a potential new project. All three scenarios show a positive NPV. He states, "we have to take this project!". What is your initial reaction regarding this new project. Do you believe the results of the scenario analysis?
Required:
Question 1: What is the risk of assuming he is correct if he is wrong?
Question 2: What is the risk of assuming he is wrong if he is correct?
Note: Please provide full description.