Question 1

Section A

PetroDrill is deciding whether to invest in one of three oil fields: Alpha, Beta, or Gamma. The management team is highly risk-averse and pessimistic, believing that the worst possible outcome is likely to occur regardless of their choice.

Which decision-making rule should PetroDrill's management apply?

Accepted Answer

Match the psychological profile (pessimistic, risk-averse) to the decision rule. They want to ensure the worst-case scenario is as good as possible.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Selecting Minimax Regret, which is about minimizing the pain of making the wrong choice in hindsight, rather than strictly protecting against the worst absolute outcome.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 1

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