The dominant firm in a market pursues a market-leader strategy. This strategy may involve

• A.Holding the market stable to avoid attracting new competitors.
• B.A flank defense to strengthen the firm's brand.
• C.Sending market signals as a mobile defense.
• D.Innovations as an offensive strategy.

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Maintenance cost at a hospital was observed to increase as activity level increased. The following data was gathered:
Activity Level -
Maintenance Cost
Month
Patient Days
Incurred
January
5,600
$7,900
February
7,100
$8,500
March
5,000
$7,400
April
6,500
$8,200
May
7,300
$9,100
June
8,000
$9,800
If the cost of maintenance is expressed in an equation, what is the independent variable for this data?

• A.Patient days.
• B.Variable cost.
• C.Total maintenance cost.
• D.Fixed cost.

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Under a total quality management TOM) approach:

• A.Measurement occurs throughout the process, and errors are caught and corrected at the source.
• B.Quality control is performed by highly trained inspectors at the end of the production process.
• C.Upper management assumes the primary responsibility for the quality of the products and services.
• D.A large number of suppliers are used in order to obtain the lowest possible prices.

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When ranking two mutually exclusive investments with different initial amounts, management should give first priority to the project:

• A.That generates cash flows for the longer period of time.
• B.Whose net after-tax flows equal the initial investment.
• C.That has the greater accounting rate of return.
• D.That has the greater profitability index.

Correct Answer: D

The profitability excess present value) index facilitates the comparison of investments that have different initial costs. The profitability index equals the present value of future net cash inflows divided by the initial cash investment. The investment with the greater profitability index will be the preferred investment. However, if investments are mutually exclusive, the net present value method may be the better way of ranking project. The excess present value, index indicates the be return per dollar invested but does not consider the alternate', , possibilities for unused Funds. Thus, the small mutually exclusive projects may have the higher n~ is but the incremental investment in the larger project may make it the better choice. For example, a US $8,000,000 project may be a better use of funds than a combination of a US $6.000.000 project with a higher ,rx and the best alternative use of the remaining US $2,000,000. A company has the following three investment projects available:

The company has a 40% debt and 60% equity capital structure. Each monetary unit of investment funds will be raised in these proportions .40 of debt and .60 of equity). The marginal cost of financing increases with the amount of new funds raised, as follows:

These investment opportunities and financing costs are shown in the graph below:

MCC=Marginal cost of capital IOS=Investment opportunity schedule

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The value of retaining employees is determined by:

• A.Human asset accounting.
• B.Financial accounting.
• C.Cost accounting.
• D.Human resource planning.

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