1. The term ‘cannibalization’ refers to __________.
A. cost of using a resource for the best value it could provide in its best alternative
B. decrease in the sales of current project caused by the launching of new project
C. decrease in overhead expenses incurred due to launch of new project
D. decrease in the sunk cost caused by launching of new project
2) A company planning to market a new model of motor scooter analyzes the effect of changes in the selling price of the motor scooter, the number of units that will be sold, the cost of making the motor scooter, the effect on Net Working Capital, and the cost of capital for the project. They predict that the break-even point for sales price for the motor scooter is $2,480. What does this mean?
A. The maximum that the motor scooter can sell for and still make the project have a positive net present value (NPV) is $2,480.
B. The predicted selling price of the motor scooter is $2,480.
C. If the motor scooter is sold for $2,480, then the net present value (NPV) for the product will be zero.
D. If the motor scooter is sold for $2,480 then the project will make a profit.