Carl Is Unsure of Which Rate He Should Use as a Discount

question 23

Multiple Choice

Carl is unsure of which rate he should use as a discount rate for project evaluations, 7 percent or 10 percent.If he can invest $30,000 in a project that will return $40,000 after-tax in four years, what is the result?

• A)He will always reject the project
• B)He will reject the project if he uses 10%
• C)He will reject the project if he uses 7%
• D)He will reject neither project

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Definitions:

Stereotyping

The process of ascribing certain traits or behaviors to individuals based solely on their membership in a particular group, without considering individual differences.

Fundamental Attribution Error

The tendency to overemphasize personality traits and underestimate situational factors when explaining another individual's behavior.

Self-fulfilling Prophecy

A belief or expectation that causes itself to become true due to positive feedback between belief and behavior.

Halo Effect

A cognitive bias where the perception of one positive characteristic of a person or thing influences the overall perception of that entity in a disproportionately positive way.