Evaluating Risk Requires That

question 14

Multiple Choice

Evaluating risk requires that:

• A) we think about different possible outcomes.
• B) we accept that our best guess about future costs and benefits could be wrong.
• C) we consider uncertain costs or benefits of an event or choice.
• D) All of these statements are true.

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Definitions:

Variable Manufacturing Costs

Costs in manufacturing that vary with the level of production output, including direct labor, materials, and utilities.

Direct Labor

The labor costs directly associated with the manufacture of products, typically wages for workers who physically produce the goods.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.