A Reason That a Small Firm Would Not Use a Discounted

question 71

Multiple Choice

A reason that a small firm would not use a discounted cash flow technique in evaluating capital investments would be

• A)company management has a preference for another quantitative method.
• B)liquidity is less of an issue for a small company.
• C)non-financial issues may be more important for a small firm.
• D)small firms invest more in short-term assets than large companies.

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Definitions:

Delaying Gratification

The capacity to withstand the allure of an instant gratification in favor of receiving a reward at a later time.

Temporal Discounting

The tendency to devalue rewards and consequences that happen in the future in favor of immediate gratifications.

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed.

Certainty Effect

The tendency of people to overweight outcomes that are certain relative to outcomes which are only probable.