There May Be a Bias Against Accepting Capital Budgeting Projects

question 43

Multiple Choice

There may be a bias against accepting capital budgeting projects if:

• A) Cash outflows are underestimated.
• B) The discount rate is underestimated.
• C) Opportunity costs are not accounted for.
• D) Inflation in cash inflow estimation is ignored.
• E) Sunk costs are excluded.

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Definitions:

Public Company Accounting Oversight Board

A non-profit corporation established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports.

Public Companies

Companies that have issued securities through an initial public offering and are traded on at least one stock exchange or in over-the-counter markets.

General Duty

An obligation imposed on individuals or entities to adhere to a standard of reasonable care while performing any acts that could foreseeably harm others.

Accuracy

The degree to which the result of a measurement, calculation, or specification conforms to the correct value or a standard.