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What Is Escalation of Commitment? Explain

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What is escalation of commitment? Explain.


Definitions:

Payback Rule

A capital budgeting principle that evaluates an investment based on the time needed to recoup the invested capital.

Payback Cutoff

The maximum allowable period for an investment to recoup its initial cost, beyond which it is not considered.

NPV

Net Present Value; a calculation used to determine the present value of a series of future cash flows, less the initial investment.

Conventional Cash Flow

A pattern of cash flow over time where an initial outlay is followed by a series of positive cash inflows.

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