Alliances Will Be Preferred to Acquisitions When

question 84

Multiple Choice

Alliances will be preferred to acquisitions when

• A) alliances limit a firm's flexibility under conditions of high uncertainty.
• B) there is minimal unwanted organizational "baggage" in an acquired firm.
• C) there are legal constraints on acquisitions.
• D) the value of a firm's resources and capabilities does not depend on its independence.

Understand and apply the concept of net present value (NPV) in investment decisions.

Apply the concept of the internal rate of return (IRR) to assess investment viability.

Differentiate between relevant and irrelevant costs in investment analysis.

Evaluate projects using the simple rate of return method.

---

Definitions:

Annual Lease Payment

The total amount of money required to be paid each year under the terms of a lease agreement.

Direct Financing Lease

A type of lease where the lessor effectively finances the leased asset, and the lease payments are structured to cover the original cost plus a profit margin.

Sales-Type Lease

A lease agreement where the lessor earns interest income over the lease term, treating the transaction like a sale.

Dealer Profit

The margin or financial gain a dealer achieves from the buying and selling of products or securities.