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

question 66

Multiple Choice

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

• A)a newly entered business presents opportunities to cost-efficiently transfer competitively valuable skills or technology from one business to another.
• B)the cost to enter the target industry will strain the company's credit rating.
• C)a company's costs to enter the target industry are so high that the potentials for good profitability and return on investment erode.
• D)the cost to enter the target industry will raise or lower the company's total profits.
• E)the cost a company incurs to enter the target industry will raise or lower production costs.

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Definitions:

Mineralogist

A scientist who specializes in the study of minerals, their composition, structure, properties, and the processes that lead to their formation.

Minerals

Naturally occurring, inorganic solids with a definite chemical composition and a crystalline structure, found in rocks and the Earth's crust.

Quartz

A hard, crystalline mineral composed of silicon and oxygen atoms, widely used in jewelry and electronics.

Halite

Also known as rock salt, a mineral form of sodium chloride (NaCl) that often occurs in evaporite deposits.