A Poker Player Calls a Large Bet Early in the Hand

question 15

Multiple Choice

A poker player calls a large bet early in the hand and another large bet later in the hand. At the end of the hand, her opponent makes a small bet. The poker player is almost positive that her opponent has superior cards, but she decides to call the small bet anyway, reasoning that she cannot fold because she has already invested so much money in the hand. The poker player's reasoning error is analogous to a manager violating which of the following principles of cash flow estimation?

• A) Sunk costs should not be considered when evaluating a project.
• B) Cash flows should be measured on an incremental basis.
• C) The value of resources used in a project should be measured in terms of their opportunity costs.
• D) All the indirect effects of a project should be included in the cash flow calculations.

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