James Spends Months Developing a Theory of Decision Making

question 10

Multiple Choice

James spends months developing a theory of decision making.But in an experimental test,only half of the participants respond as his theory predicted.James concludes that the rest of the subjects did not understand the directions and proclaims that the experiment is evidence in favor of his theory.This is an example of the ____.

• A) confirmation bias.
• B) conversion effect.
• C) "eureka" phenomenon.
• D) gambler's fallacy

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Definitions:

Project Evaluation

The process of determining the potential successes or failures of a proposed project based on various criteria.

DCF Approach

A valuation method that estimates the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Cost of Equity

The return that investors expect for investing in a company's equity, considering the risk of the investment.

Retained Earnings

The portion of a company's profits that is kept or retained for reinvestment in the business, rather than being paid out as dividends.