Which of the Following Is a Reason Why Risk Analysis

question 56

Multiple Choice

Which of the following is a reason why risk analysis is an important part of capital budgeting?

• A) The people who propose projects have no vested interest in whether or not they are accepted.
• B) Marketing managers are rarely excessively optimistic.
• C) Project cash flows can be highly uncertain.
• D) Financial analysts are rarely excessively pessimistic.

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Definitions:

Average Cost

The overall expense of manufacturing split by the quantity of units made.

Rate of Return

The increase or decrease in value of an investment throughout a determined period, shown as a percent of the investment’s initial cost.

Natural Monopolies

A market situation where a single supplier, due to unique resources, technology, or economies of scale, can provide a product or service at a lower cost than any potential competitor.

Regulatory Agency

A governmental body responsible for enforcing specific laws and regulations to protect public interest in areas such as health, safety, and the environment.