Concerned That Its Dependence on Sales of Microprocessors to Computer

question 57

Multiple Choice

Concerned that its dependence on sales of microprocessors to computer firms would make it vulnerable to sharp sales declines during the recession of 2007-2009,Intel began to develop memory chips that could be used in portable consumer electronic devices such as cell phones.One reason that Intel chose to branch out from producing microprocessors for computers is that

• A) sales of computers have been declining over the past decade.
• B) technology with respect to microprocessor production was no longer advancing at a rate where Intel's new products were still wanted by computer manufacturers.
• C) Intel had lost a majority of its market share in microprocessor production to foreign competition.
• D) computers are durable goods and spending on computers follows the business cycle.

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Definitions:

Soft Rationing

An internal policy mechanism by which a company limits the amount of funding allocated to new or existing projects, without a shortage of available funds.

NPV Project

A project evaluated using the Net Present Value method, which calculates the present value of all cash flows associated with the project, minus the initial investment.

Straight-Line

A method of calculating depreciation of an asset which assumes the asset will lose an equal amount of value each year over its useful life.

Discount Rate

The interest rate used to discount future cash flows to their present value.