Most Film Processing Companies Have a Policy of Printing Every

question 5

Multiple Choice

Most film processing companies have a policy of printing every picture on a roll of film and allowing customers to request a refund for pictures that were not clearly developed.The companies do this knowing that most customers do not ask for refunds.This is an example of consumers

• A)failing to ignore sunk costs.
• B)being overly optimistic about their future behaviour.
• C)not taking nonmonetary opportunity costs into account.
• D)not making themselves aware of the policy regarding refunds.

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Definitions:

Present Value

The present value of a future amount of money or a series of cash flows, discounted by a certain rate of return.

Net Present Value Rule

A principle that states an investment should be made if the net present value of its cash flows, discounted at the hurdle rate, is positive.

Invest

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.