Why Does FedEx Purchase Its Trucks Externally, and Not Operate

question 22

Multiple Choice

Why does FedEx purchase its trucks externally, and not operate a truck manufacturing business?

• A)FedEx's needs are well below the minimum efficient scale for truck production
• B)FedEx's top managers do not like the truck manufacturing industry
• C)FedEx does not know how to produce trucks
• D)They could do - they've just not chosen to do so.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value; often reflects the risk-free interest rate.

Discount Rate

The discount rate is the interest rate set by central banks charged to commercial banks for loans, affecting the cost of borrowing money.

Actual Interest Rate

The real rate of interest earned or paid on an investment or loan, taking into account the effect of compounding.

Cash Discounts

Reductions in price given to a customer for prompt payment of their bill.