In Computing the Net Present Value of a Project, a Manager

question 54

Multiple Choice

In computing the net present value of a project, a manager uses a cost of capital number that is too low. This error causes the manager to compute a net present value that:

• A)is lower that what it in fact should be.
• B)is higher that what it in fact should be.
• C)has no effect on the net present value computation.
• D)is undefined in mathematical terms.

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Definitions:

Weber's Law

A principle in psychology that states the smallest change in a stimulus that can be detected is a constant proportion of the original stimulus's intensity.

Volley Principle

Principle addressing limitations of the frequency theory of hearing, stating that a cluster of nerve cells can fire neural impulses in rapid succession, producing a volley of impulses.

Perceptual Set

A predisposition or readiness to perceive something in a particular way.

Selective Attention

The process by which a person focuses on one stimulus or task while ignoring other stimuli, highlighting the capacity to prioritize cognitive processing.