Even If Production Costs Are Higher in a Foreign Country

question 16

Multiple Choice

Even if production costs are higher in a foreign country, a UK firm may establish a manufacturing plant in the foreign country now if:

• A) the host government of that country eliminates all quotas.
• B) the host government of that country reduces all quotas.
• C) the host government of that country increases all quotas.
• D) the host government of that country eliminates all tariffs.

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Definitions:

Mutually Exclusive

Projects that cannot be performed at the same time. A company could choose either Project 1 or Project 2, or it can reject both, but it cannot accept both projects.

IRR

Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It is used to evaluate the attractiveness of an investment or project.

Hard Capital Rationing

Hard capital rationing involves a situation where a company cannot access additional funds for investments at any cost due to external factors, such as market conditions or regulatory limits.

Discounted Payback

A capital budgeting method that calculates the time it takes to recoup an investment's initial costs, taking the time value of money into account.