Which of the Following Would Fall Under the Definition of Cannibalism

question 69

Multiple Choice

Which of the following would fall under the definition of cannibalism as it applies to capital budgeting?

• A) If a firm offered a 'low-fat' version of a current product and sales of that new product were expected to reduce sales of the current version.
• B) The eating of the flesh of an animal by another animal.
• C) If a competitor were to offer a similar or identical product to one your company already offers and this would lead to reduced sales of your product.
• D) Both (a)and (c)are true.
• E) None of the above is true.

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Definitions:

Capitalization Rate

A real estate valuation measure used to compare different investments, calculated as the ratio between the net operating income produced by an asset and its capital cost.

Goodwill

An intangible asset that represents the value of a company's brand, customer relationships, and reputation beyond its tangible assets and liabilities.

Expected Growth Rate

Expected growth rate is the projected percentage increase in the value of an investment, company revenue, or economy over a specific time period.

Future Earnings

The expected financial profits or income of an entity or individual for future periods.