Which One of These Statements Is Correct

question 23

Multiple Choice

Which one of these statements is correct?

• A)All allocated costs should be included in the initial cost of a project.
• B)Sunk costs should be included in the initial cost of a project.
• C)Synergy occurs when a new product reduces the sales of a current product.
• D)Costs incurred prior to deciding whether or not to produce a new product are sunk costs.
• E)Incremental costs should not be included in a project's initial cost estimate.

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Definitions:

Political Risk

In international business, the chance that the value of a firm’s investment in a foreign country will be reduced by political actions of either the foreign government or terrorists.

Exchange Rate Risk

The risk that international trade dealings will earn less than expected because of movement in exchange rates.

Economic Risk

The possibility of loss caused by macroeconomic or market conditions, such as changes in interest rates or recessions.

Forward Rate

The agreed upon exchange rate for a currency transaction that will occur at a future date.