The Following Factors Should Govern the Allocation of Control Rights

question 13

Multiple Choice

The following factors should govern the allocation of control rights in joint ventures except for:

• A) The degree to which there may be an underinvestment of either party that could have an adverse effect on the success of the alliance
• B) The relative bargaining parties of the two partners
• C) The extent to which one party may engage in opportunistic behavior, which can have an adverse effect on the outcomes
• D) All the above
• E) Both a and c

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Definitions:

Variable Cost

Expenditures that fluctuate according to the degree of production or the volume of goods produced.

Fixed Cost

Costs that remain constant regardless of any change in a firm's activity level, such as lease payments or insurance premiums.

Depreciation

The systematic allocation of the depreciable amount of an asset over its useful life.

Discount Rate

In discounted cash flow analysis, it's the rate used to bring future cash flows down to their present worth.