Asked by Langle Eunice on Jun 12, 2024
Verified
Which one of the following most likely represents the greatest forecasting risk?
A) The replacement of current machinery with similar equipment.
B) The reduction in production costs due to improved quality controls.
C) The introduction of a new product that expands the types of goods offered.
D) The introduction of an updated existing product.
E) The sale of a used piece of equipment that is no longer needed.
Forecasting Risk
The potential for actual outcomes to vary significantly from the predictions or expectations due to changes in variables or conditions.
Replacement
The act of substituting a new asset or item for an old or damaged one.
- Understand the concept and implications of forecasting risk in capital budgeting.
Verified Answer
SM
sofia munozJun 19, 2024
Final Answer :
C
Explanation :
The introduction of a new product that expands the types of goods offered represents the greatest forecasting risk because it involves entering a potentially unknown market with new dynamics, customer preferences, and competition, making the outcomes more uncertain compared to the other options which involve more predictable updates or improvements to existing operations.
Learning Objectives
- Understand the concept and implications of forecasting risk in capital budgeting.
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