Which of the Following Is a Disadvantage of Licensing

question 84

Multiple Choice

Which of the following is a disadvantage of licensing?

• A) The licensing company gains entry into a foreign market at a high risk.
• B) It takes a lot of time for the licensee to gain production expertise and name.
• C) Licensing is a complex way for a manufacturer to enter international marketing.
• D) The licensor potentially creates a competitor in the form of the licensee.
• E) The licensee is restricted from gaining knowledge about the licensor's intellectual property.

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Definitions:

Cost Of Capital

The earnings rate a firm must achieve on its investment endeavors to preserve its market value and draw in capital.

Discount Rate

In discounted cash flow analysis, it's the rate of interest used to determine today's value of cash flows expected in the future.

Certainty Equivalent Approach

A method used in capital budgeting and investment finance that adjusts the future cash flows of risky investments to reflect their riskiness as compared to a certain cash flow.

Computer Simulation

Computer Simulation is a digital simulation of a real-world process or system over time, using computer software to study the behavior under various conditions.