Which One of the Following Best Illustrates an Error Which

question 28

Multiple Choice

Which one of the following best illustrates an error which you,as a manager,might make due to overconfidence?

• A)overestimating the best outcome expected from a project while underestimating the possibility of a less favorable outcome
• B)assuming that a new project will be profitable since similar projects in the past were successful
• C)assuming that your expectations of the future outcome from a project are more accurate than the expectations of others within your organization
• D)listening to the advice of subordinates with whom you agree while ignoring the advice of subordinates with whom you tend to disagree
• E)downplaying the cost of future failure of an existing project since the project has already paid for itself

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Definitions:

Investment Project

A project involving the allocation of capital resources with the expectation of generating future returns or benefits.

Discount Factor

A multiplier for future cash flows to convert them into present value, reflecting the time value of money.

Contribution Margin

The amount remaining from sales revenue after variable costs are deducted, indicating how much revenue is contributing to fixed costs and profit.

Incremental Annual Net Cash Inflows

The additional cash that flows into a business on an annual basis as a result of a specific action or investment.