Question

Question) Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions.
    a.   the inclusion of opportunity costs
   b.   errors in projected cash flows
   c.   the exclusion of sunk costs
   d.   erosion
   e.   net working capital cost

Answer 1

B) Errors in projected cash flows

Forecasting risk is the risk that a poor decision is made because of errors in projected cash flows. The danger is greatest with a new product because the cash flows are probably harder to predict.

Forecasting risk, which is also known as estimation risk, is the possibility that errors in projected cash flows will lead to incorrect decisions. Forecasting risk may be greater for a new product because a new product comes with greater needs of attention to competition