The Cost-Of-Entry Test for Evaluating Whether Diversification into a Particular

question 75

Multiple Choice

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves

• A) determining whether a newly entered business presents opportunities to cost-efficiently transfer competitively valuable skills or technology from one business to another.
• B) determining whether the cost to enter the target industry will strain the company's credit rating.
• C) considering whether a company's costs to enter the target industry are low enough to allow for good profits or so high that potential profits would be eroded.
• D) determining whether the cost to enter the target industry will raise or lower the company's total profits.
• E) determining whether the cost a company incurs to enter the target industry will raise or lower production costs.

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Definitions:

Procedural Memory

A type of long-term memory that enables people to perform tasks without conscious awareness of having learned them.

Semantic Network

A conceptual structure used in cognitive psychology and artificial intelligence which represents semantic relations between concepts in a network.

Nodes

Points in a network or system where lines or pathways intersect or branch.

Clustering Hierarchy

A method of organizing elements into nested groups based on similarity or distance.