Acme Software (Scenario) Acme Software Is a U.S.-Based Maker of Software Products for Software

question 15

Multiple Choice

Acme Software (Scenario)
Acme Software is a U.S.-based maker of software products for the health care industry. Recently Acme has been investigating whether it would be beneficial to internationalize some of its value-chain activities. Acme hires a consulting group to help determine which, if any, value-chain activities could be conducted abroad to promote business growth. The consulting group identifies two health care software development companies in India that could provide programming services at a lower cost than Acme's current expenditures for programming. In addition, the consultants conduct international market research that shows that German health care companies have a strong demand for the type of software that Acme offers.
-Which of the following would be most important for Acme to determine before outsourcing its programming services to India?

• A) What benefits have Indian companies gained historically from internationalizing their value-chain activities?
• B) Do Indian businesses outsource value-chain activities to Europe?
• C) Would the lower cost of outsourcing allow Acme to sustain a competitive advantage in its business operations?
• D) Is either of the Indian health care companies interested in moving their operations abroad?

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Definitions:

Dividend Growth Model

A valuation method that estimates the price of a company's stock based on the future dividends it is expected to pay, which are assumed to grow at a constant rate.

Current Stock Price

The price at which a stock is currently trading on the stock market.

Discount Rate

It refers to the rate used in discounted cash flow analysis for the purpose of calculating the present value of future expected cash flows.