Project Black Swan Requires an Initial Investment of $115,000

question 88

Multiple Choice

Project Black Swan requires an initial investment of $115,000. It has positive cash flows of $140,000 for each of the next two years. Because of major demolition and environmental clean-up costs, cash flow for the third and final year of the project is $(170,000) . The company accepts all projects with a payback period of 2 years or less.

• A) The payback rule would reject this project because of its risks are too high.
• B) The payback rule would reject this project because all negative cash flows are added together.
• C) If strictly applied, the payback rule would reject this project.
• D) If strictly applied, the payback rule would accept this project.

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Definitions:

Individualistic Cultures

Societies that emphasize personal achievements and rights, valuing individual over the group.

Minimal Intergroup Situation

A theoretical situation used in social psychology to study the minimal conditions required for discrimination to occur between groups.

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Stereotype Threat

The risk of confirming negative stereotypes about one's social group, which can impair performance in affected individuals.