In the Context of Marketing, Which of the Following Is

question 122

Multiple Choice

In the context of marketing, which of the following is the best example of risk taking?

• A) A restaurant owner creates a dish using fish purchased the day before.
• B) An entrepreneur offers to sell products on credit to attract new customers.
• C) A clothing retailer opens a store in a rundown neighborhood.
• D) An inventor creates a new safety device for older adults living alone.

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Definitions:

Cost of Capital

The cost of funds used for financing a business, calculated as the weighted average of debt and equity costs.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the firm's goal of wealth maximization.

Real Option

The ability to take a course of action that under certain circumstances leads to a benefit. The circumstances that make the action desirable are uncertain, and maintaining the ability to take it requires expenditures before that uncertainty is resolved. Hence, bearing the preliminary cost gives one the option of taking an action in the future that may or may not turn out to be desirable.

Expected NPV

The anticipated Net Present Value of an investment, which estimates the project's profitability by discounting future cash flows to their present value.