General Mfg

question 28

Essay

General Mfg. & Tool Corp is a small company producing industrial machinery, including a special computer-controlled milling machine capable of producing ball-bearings that can meet the tiniest known industrial specifications. Many firms using this machine sell their output to defence contractors in the USA and Canada, but the output finds its way into a great many consumer goods as well, such as VCRs and automobiles. You are approached as a trade consultant by the president of GMT Corp., and asked to make recommendations about licensing the production of the machines in South-East Asia. Describe what steps GMT Corp. should take to determine the exportability of their licence and describe the major advantages of licensing. Further describe for GMT Corp. what should go into any good licensing agreement.

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Definitions:

Debt-Equity Ratio

A ratio calculating the balance of debt and equity utilized for financing a company's assets.

Risk-Free Rate

A hypothetical profit rate from a risk-free investment, usually shown by the earnings on state-backed securities.

Yield-to-Maturity

The total return anticipated on a bond if the bond is held until its maturity date, considering all interest payments and the repayment of principal.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.