The Final Step in the McKinsey Pentagon Is to Establish

question 8

True/False

The final step in the McKinsey pentagon is to establish the value of the company after optimizing for all internal restructurings and external improvements, so that management can rapidly sell the business to a corporate raider

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered.

Incremental Cash Flow

The additional cash flow a company receives from undertaking a new project, after accounting for the expenses involved in the project.

Variable Costs

Costs that change in proportion to the level of production or sales activities, such as materials and labor.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.