Chapter 1, Problem 17.5EC

What sorts of factors might limit the ability of rational investors to take advantage of any “pricing errors” that result from the actions of “behavioral investors”?

What should a company do when the cost of eliminating the conditions that create an IT risk exceeds the potential losses that may occur? a. Accept the risk b. Reduce the risk c. Avoid risk d. Transfer the risk

If we use future value rather than present value to decide whether to make an investment, A) we will make a bad decision, since the future value will always be higher if the discount rate is positive. B) we will make a bad decision, since the future value will always be lower if the discount rate is positive. C) we will make the same decision using either future value or present value. D) There is not enough information given to answer the question.

Which of the following would not be relevant in a make or buy decision? Unavoidable variable costs Incremental fixed costs Avoidable fixed costs Opportunity costs

Is a method of screening out in certain situations an unacceptable investment alternative?