There May Be a Bias Against Accepting Capital Budgeting Projects

question 267

Multiple Choice

There may be a bias against accepting capital budgeting projects if:

• A) Cash outflows are underestimated.
• B) The discount rate is underestimated.
• C) Opportunity costs are not accounted for.
• D) Inflation in cash inflow estimation is ignored.
• E) Sunk costs are excluded.

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Definitions:

Wage Rate

The standardized amount of compensation an employee receives from an employer in exchange for their labor, typically expressed per hour or year.

Firefighters

Emergency responders trained to fight fires, conduct rescue operations, and mitigate other Hazards to protect life and property.

Infinitely Inelastic

Describes a situation where the demand for a good does not change regardless of changes in its price.

Economic Rents

Earnings in excess of the minimum amount required to keep a factor of production in its current use.