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The current controllable margin for Claremont Division is $62,000.Its current operating assets are $200,000.The division is considering purchasing equipment for $60,000 that will increase annual controllable margin by an estimated $10,000.If the equipment is purchased, what will happen to the return on investment for Claremont Division?
Anchoring Effect
A cognitive bias where an individual relies too heavily on an initial piece of information (the "anchor") when making decisions.
Hedonic Treadmill
A theory suggesting that people continually seek new levels of stimulation or material goods to maintain happiness, but generally return to a stable level of happiness despite major positive or negative changes.
Prospect Theory
Prospect theory is a behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known.
Neoclassical Economics
An economic theory that focuses on how consumer demand and production costs influence price, output, and income distribution in markets.
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