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

question 12

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 so high that the potentials for good profitability and return on investment are 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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