Use the Table for the Question(s)below

question 8

Multiple Choice

Use the table for the question(s) below.
-Panjandrum Industries,a manufacturer of industrial piping,is evaluating whether it should expand into the sale of plastic fittings for home garden sprinkler systems.It has made the above estimates of free cash flows resulting from such a decision.There are concerns of the sensitivity of this project to changes in the cost of capital.For what cost of capital does this project break-even?

• A)12%
• B)14%
• C)16%
• D)18%

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Definitions:

Rationalization Attribution

The process of explaining an individual's behavior with logical, but not always true, reasons to justify actions or opinions.

Self-Serving Bias

The common human tendency to attribute success to personal characteristics and failures to external factors, thereby protecting self-esteem.

Defensive Attribution

A cognitive bias where individuals attribute causes of accidents or misfortunes to external factors when involving others but to internal factors when it involves themselves, often to shield their ego.

Fundamental Attribution Bias

The tendency to overemphasize personality-based explanations for behaviors observed in others while underemphasizing the role of external factors.