The maximax criterion is a decision-making rule used under conditions of uncertainty. It is an optimistic approach where the decision-maker identifies the best possible outcome (the maximum payoff) for each alternative and then chooses the alternative that offers the best of these best outcomes (the "maximum of the maximums").

Applying this to the data:

Investment A: Maximum NPV = $120,000

Investment B: Maximum NPV = $110,000

Investment C: Maximum NPV = $100,000

Investment D: Maximum NPV = $90,000

The highest of these maximum values is $120,000, which corresponds to Investment A.

B. Investment B: Its maximum possible NPV of $110,000 is less than the maximum possible NPV of Investment A ($120,000).

C. Investment C: Its maximum possible NPV of $100,000 is less than the maximum possible NPV of Investment A ($120,000).

D. Investment D: Its maximum possible NPV of $90,000 is the lowest among all options and thus not chosen under the maximax rule.

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1. Drury

C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning. In Chapter 21

"Decision-making under conditions of risk and uncertainty

" the maximax rule is described as a criterion for an optimistic decision-maker who desires the best possible outcome

selecting the alternative with the highest possible payoff.

2. Atrill

P. (2017). Financial Management for Decision Makers (8th ed.). Pearson. Chapter 9

"Investment appraisal under uncertainty

" explains that the maximax approach involves identifying the best possible outcome for each course of action and selecting the one with the highest potential return.

3. Renema

F. (2019). Decision-making under deep uncertainty for strategic investment decisions. University of Twente. Section 2.2.1

"Decision rules for decision-making under uncertainty

" defines the maximax criterion as selecting the alternative that maximizes the maximum possible payoff. (Available at: https://doi.org/10.3990/1.9789036548583)