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Companies considering new cost-cutting manufacturing

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Re: Companies considering new cost-cutting manufacturing [#permalink]

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New post 15 Mar 2017, 07:38
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A
B
C
D
E

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  95% (hard)

Question Stats:

14% (01:31) correct 86% (02:07) wrong based on 518 sessions

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What is the correct answer? someone please help
[Reveal] Spoiler: OA

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Re: Companies considering new cost-cutting manufacturing [#permalink]

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New post 15 Mar 2017, 07:39
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.

Please help with the answer and proper approach ?

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Companies considering new cost-cutting manufacturing [#permalink]

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New post 19 Mar 2017, 09:23
vrindachopra wrote:
What is the correct answer? someone please help


This seems to be a debatable question - both options B and D could be correct.

B could be correct because it indicates a problem with the consideration that costs remain constant.
D could be correct because it indicates a problem with the consideration that selling prices and share of market remain constant.

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Re: Companies considering new cost-cutting manufacturing [#permalink]

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New post 19 Mar 2017, 16:10
Already discussed here. Please, refer to the discussion above: https://gmatclub.com/forum/companies-co ... fl=similar
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Re: Companies considering new cost-cutting manufacturing   [#permalink] 19 Mar 2017, 16:10
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