Gold Leaf Computers Sources the Components for Its Laptops from Various

question 25

Multiple Choice

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should

• A) continue to outsource production.
• B) vertically integrate.
• C) exit the laptop industry.
• D) diversify its activities.

---

Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

NPV Decision Rules

Guidelines used to determine the viability of an investment or project based on the Net Present Value, which calculates the present value of cash inflows minus the present value of cash outflows.

Shareholder Wealth

The total value of a company to its shareholders, typically measured by the market capitalization or the equity value of the company.

Cost of Capital

The necessary yield a business must secure on its ventures to sustain its valuation in the marketplace and raise capital.