A Heuristic Decision Makers Use to Get a Starting Point

question 73

Multiple Choice

A heuristic decision makers use to get a starting point for a decision and adjust beyond that point is

• A) The representativeness heuristic.
• B) The anchoring and adjustment heuristic.
• C) The availability heuristic.
• D) Decision makers use none of the heuristics listed in the answers.

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Definitions:

MIRR

Modified Internal Rate of Return (MIRR) is a financial metric that evaluates the profitability of investments, adjusting the internal rate of return (IRR) to account for the reinvestment of cash flows at a different rate.

Present Value

The current value of a future amount of money or stream of cash flows, discounted at a certain interest rate.

Future Value

The amount a present sum will grow into at a specified interest rate over a specified period of time.

Profitability Index

A calculation that determines the relationship between the costs and benefits of a proposed project through the ratio of present value of future cash flows over the initial investment.