When a Manager Applies a Net Present Value Analysis Using

question 16

Multiple Choice

When a manager applies a net present value analysis using a just-in-time philosophy, they are least likely to encounter:

• A)hurdle rates that are set too high.
• B)time horizons that are set too short.
• C)high uncertainties with respect to future operating cash flows.
• D)biases with respect to small, incremental projects.
• E)non value-added costs.

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that simplify decision making, often leading to a quick but imprecise solution.

Ponzo Illusion

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Social Contract Theory

A theory in political philosophy that posits the legitimacy of the authority of the state over the individual is grounded in a hypothetical contract between them.

Wason Selection Task

A logical puzzle used as a test in psychology to study conditional reasoning and confirmation bias.