The Idea That Once a Manager Makes a Large Investment,he

question 61

Multiple Choice

The idea that once a manager makes a large investment,he should not abandon the project is known as the:

• A)negative NPV fallacy.
• B)abandonment fallacy.
• C)sunk cost fallacy.
• D)dependence fallacy.

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the central bank's discount window; also used in discounted cash flow (DCF) analysis to present value future cash flows.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity and financial stability.

Compounded Monthly

A method of calculating interest where the accumulated interest is added to the principal sum each month, leading to an increase in the total amount of interest earned.

Monthly Payments

Regular payments made over a period, often in the context of loans or leases where the total amount owed is divided into equal installments over time.