New Projects or Products Can Have an Indirect Effect on the Firm

question 69

Multiple Choice

New projects or products can have an indirect effect on the firm as well as a direct effect.Which of the following appears to be an indirect effect of launching a new product?

• A)additional working capital is required.
• B)the sales force will need to be increased.
• C)sales of our similar product will decline.
• D)additional machinery must be purchased.

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital where each category of capital is proportionately weighted.

Capital Structure

The particular combination of debt and equity that a company uses to finance its overall operations and growth.

Financial Risks

The possibility of losing money on an investment or business operation due to market fluctuations, default, or other financial uncertainties.

Homemade Leverage

The use of personal borrowing to change the overall amount of financial leverage to which an individual or household is exposed.