The corporate decision on type and level of R&D activity is difficult because
A) the interest-rate cost of funds is difficult to estimate.
B) much of corporate R&D is based on the pursuit of science, not on the profit motive.
C) expected returns lie in the future and are highly uncertain.
D) total returns and marginal returns greatly diverge.

Question

Quizplus · Accepted Answer

Corporate R&D involves investing in future technology and innovation which is uncertain in terms of expected returns. This uncertainty makes it difficult to make a decision on the level and type of R&D activity to pursue. Other factors such as interest rates and profit motive may play a role, but the uncertainty of outcomes is the primary challenge.

The Corporate Decision on Type and Level of R&D Activity