Which of the Following Is an Advantage of Applying the Economic

question 90

Multiple Choice

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?

• A) When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage.
• B) In economic value perspective, analysts not only consider historical costs, but also opportunity costs.
• C) Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task.
• D) It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios.

Recognize the strategies and dynamics of oligopolistic firms, including price-setting and competitive behavior.

Understand the consequences of regulatory and legal actions on industries with price-fixing and market-sharing agreements.

Comprehend the importance and impact of cartel-like organizations (e.g., OPEC) on global markets.

Learn the definitions and examples of market terminologies and measurements, like cutthroat competition and collusion.

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Definitions:

Expected Dividend

The dividend payment a shareholder anticipates receiving, based on the company's past dividend history or announcements.

Weighted Average Cost of Capital (WACC)

A calculation of a firm's cost of capital where each category of capital is proportionately weighted, used to assess the average rate a company is expected to pay to its security holders.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often estimated using the Capital Asset Pricing Model (CAPM).

Pre-Tax Cost of Debt

The rate of return that a company pays on its debt, before taking into account tax deductions.