Which of the following is a good reason to use divisional costs of capital?
A) Division managers have no vested interest in underestimating the capital costs associated with their division.
B) Divisional costs of capital reduce are relatively easy to estimate.
C) Comparison firms are often engaged in various lines of business.
D) The divisions of a company represent well-defined lines of business with different risk characteristics, for example oil and gas exploration and distribution through pipelines.
Answer: D
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Information distortion is exaggerated by the fact that
A) supply chains today produce a large amount of product variety. B) supply chains today produce a small amount of product variety. C) the telephone effect is extreme in situations where technology is in use. D) different stages of supply chains send excessive data.