Kurt, Who Is a Divisional Manager, Continually Brags That His

question 77

Multiple Choice

Kurt, who is a divisional manager, continually brags that his division's required return for its projects is one percent lower than the return required for any other division of the firm.Which one of the following most likely contributes the most to the lower rate requirement for Kurt's division?

• A)Kurt tends to overestimate the projected cash inflows on his projects.
• B)Kurt tends to underestimate the variable costs of his projects.
• C)Kurt has the most efficiently managed division.
• D)Kurt's division is less risky than the other divisions.
• E)Kurt's projects are generally financed with debt while the other divisions' projects are financed with equity.

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Definitions:

Competitive Advantage

A condition or circumstance that puts a company in a favorable or superior position compared to its competitors.

Growth Strategy

A plan of action designed to increase the size, revenue, or market share of a business.

Organization's Culture

The shared values, beliefs, and practices that shape the social and psychological environment of a business organization.

Values

Core beliefs or standards that guide the behavior and decision-making processes of individuals and organizations.