An Investment Was Analyzed and Its NPV Was Determined to Be

question 149

Multiple Choice

An investment was analyzed and its NPV was determined to be $2,000. The company's expected rate of return was 12%. The manager of the division is currently earning 12% on its other investments. This investment will generate losses for the first two years. Which of the following statements best describes what the manager will likely be motivated to do if he is evaluated based on profits?

• A) Accept the proposal since the rate of return expected is equal to the rate used for the analysis
• B) Accept the proposal since the rate of return on the investment is equal to the required rate of return
• C) Do not accept the proposal since the rate of return expected is less than the rate used for the analysis
• D) Do not accept the proposal since losses are expected for the first two years

Distinguish between different fallacies that involve flawed reasoning concerning parts and wholes (composition and division).

Understand the structure and characteristics of circular arguments and how they fail to provide real support for their conclusions.

Identify the fallacy of loaded questions and understand how they presuppose information that has not been established.

Analyze arguments for non sequiturs, where conclusions do not logically follow from premises.

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Definitions:

Confession

The act of admitting to something, particularly acknowledging one's sins or wrongdoings, often within a religious or legal context.

Duress

A compulsion by threat or force; a condition in which a person acts as a result of pressure or coercion.

Jury

A jury is a group of people sworn to render a verdict in a legal case on the basis of evidence presented to them in a court.

Covariation Principle

A theory suggesting that people attribute behavior to causes that appear at the same time as the behavior and are absent when the behavior does not occur.