A ?Rm Can Exploit the Learning Effect By

question 78

Multiple Choice

A ?rm can exploit the learning effect by:

• A) increasing the number of stages in its value chain.
• B) diversifying into unrelated markets.
• C) growing organically and merging with a rival ?rm.
• D) acquiring smaller, ine?cient competitors.

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Definitions:

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.

Net Present Value

The calculation that compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account, often used to assess the profitability of an investment.

Tax Rate

The percentage at which an individual or corporation is taxed.

Payback Period

The duration of time it takes to recoup the cost of an investment.