To What Does the Term Differential Cost Refer

question 8

Multiple Choice

To what does the term differential cost refer?

• A) A difference in cost that results from selecting one alternative instead of another.
• B) The benefit forgone by selecting one alternative instead of another.
• C) A cost that does not entail any dollar outlay, but which is relevant to the decision-making process.
• D) A cost that continues to be incurred even though there is no activity.

---

Definitions:

IRRs

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows equal to zero.

Mutually Exclusive

A condition in which two or more propositions cannot both be true at the same time, often applied in scenarios of project selection or decision making.

IRR

Internal Rate of Return, a financial metric used to assess the profitability of investments by calculating the interest rate that makes the net present value of all cash flows equal to zero.

Decision Rules

Guidelines or criteria used to make choices among alternatives in decision-making processes.