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sana.noor
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Companies considering new cost-cutting manufacturing processes often compare the projected results of making the investment against the alternative of not making the investment with costs, selling prices, and share of market remaining constant.
Which of the following, assuming that each is a realistic possibility, constitutes the most serious disadvantage for companies of using the method above for evaluating the financial benefit of new manufacturing processes?
(A) The costs of materials required by the new process might not be known with certainty.
(B) In several years interest rates might go down, reducing the interest costs of borrowing money to pay for the investment.
(C) Some cost-cutting processes might require such expensive investments that there would be no net gain for many years, until the investment was paid for by savings in the manufacturing process.
(D) Competitors that do invest in a new process might reduce their selling prices and thus take market share away from companies that do not.
(E) The period of year chosen for averaging out the cost of the investment might be somewhat longer or shorter, thus affecting the result.
D
what makes me confuse is that according to argument, the cost, selling price and share of market is kept constant to evaluate other alternatives. if we are keeping the market share constnat then how we can assume about our competitors startegy. if we are assuming that competitors might take market share, then the option A is almost equal to option D. cost of material of new process might change with time. [/url]
Which of the following, assuming that each is a realistic possibility, constitutes the most serious disadvantage for companies of using the method above for evaluating the financial benefit of new manufacturing processes?
(A) The costs of materials required by the new process might not be known with certainty.
(B) In several years interest rates might go down, reducing the interest costs of borrowing money to pay for the investment.
(C) Some cost-cutting processes might require such expensive investments that there would be no net gain for many years, until the investment was paid for by savings in the manufacturing process.
(D) Competitors that do invest in a new process might reduce their selling prices and thus take market share away from companies that do not.
(E) The period of year chosen for averaging out the cost of the investment might be somewhat longer or shorter, thus affecting the result.
D
what makes me confuse is that according to argument, the cost, selling price and share of market is kept constant to evaluate other alternatives. if we are keeping the market share constnat then how we can assume about our competitors startegy. if we are assuming that competitors might take market share, then the option A is almost equal to option D. cost of material of new process might change with time. [/url]
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