An Outsourcing Strategy

question 15

Multiple Choice

An outsourcing strategy

• A)is nearly always a more attractive strategic option than merger and acquisition strategies.
• B)carries the substantial risk of raising a company's costs.
• C)carries the substantial risk of making a company overly dependent on its suppliers.
• D)increases a company's risk exposure to changing technology and/or changing buyer preferences.
• E)involves farming out certain value chain activities presently performed in-house to outside vendors.

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Definitions:

Pure Discount Bond

A type of bond that is issued at a discount to its face value, pays no interest, and is redeemed at its face value at maturity.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk of financial loss, typically represented by the yield on government bonds.

Equity

The ownership interest in a company, represented by the amount of money that would be returned to shareholders after paying off all liabilities.

Option Premium

The price paid by the buyer of an options contract to the seller, representing the cost of acquiring the option.