When Considering Vertical Integration as a Strategy to Add Value

question 55

True/False

When considering vertical integration as a strategy to add value, managers must be careful because sometimes it may reduce a company's ability to create value when the environment changes.

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Definitions:

Lessor

A party that leases an asset to another party, known as the lessee, for periodic payments.

Minimum Lease Payments

The least amount of payments over the lease term that the lessee is obligated to make to the lessor.

Residual Value Guarantee

An assurance provided by a party (usually lessor or seller) that guarantees a minimum future value for an asset at the end of its lease term.

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.