A poker player calls a large bet early in the hand and another large bet later in the hand. At the end of the hand, her opponent makes a small bet. The poker player is almost positive that her opponent has superior cards, but she decides to call the small bet anyway, reasoning that she cannot fold because she has already invested so much money in the hand. The poker player's reasoning error is analogous to a manager violating which of the following principles of cash flow estimation? a. Cash flows should be measured on an incremental basis. b. All the indirect effects of a project should be included in the cash flow calculations. c. Sunk costs should not be considered when evaluating a project. d. The value of resources used in a project should be measured in terms of their opportunity costs.
A poker player calls a large bet early in the hand and another large bet later in the hand. At the end of the hand, her opponent makes a small bet. The poker player is almost positive that her opponent has superior cards, but she decides to call the small bet anyway, reasoning that she cannot fold because she has already invested so much money in the hand. The poker player's reasoning error is analogous to a manager violating which of the following principles of cash flow estimation? a. Cash flows should be measured on an incremental basis. b. All the indirect effects of a project should be included in the cash flow calculations. c. Sunk costs should not be considered when evaluating a project. d. The value of resources used in a project should be measured in terms of their opportunity costs.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
A poker player calls a large bet early in the hand and another large bet later in the hand. At the end of the hand, her opponent makes a small bet. The poker player is almost positive that her opponent has superior cards, but she decides to call the small bet anyway, reasoning that she cannot fold because she has already invested so much money in the hand. The poker player's reasoning error is analogous to a manager violating which of the following principles of cash flow estimation?
| a. |
Cash flows should be measured on an incremental basis.
|
|
| b. |
All the indirect effects of a project should be included in the cash flow calculations.
|
|
| c. |
Sunk costs should not be considered when evaluating a project.
|
|
| d. |
The value of resources used in a project should be measured in terms of their
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education