Diacon Products Manufactures and Sells a Wide Variety of Complex

question 30

Multiple Choice

Diacon Products manufactures and sells a wide variety of complex electronic products.Diacon Products wants to enter foreign markets and is deciding on a mode of entry.Vice President of Manufacturing,Brooke Monroe,is making a strong push for a turnkey project.Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets that would help Brooke Monroe make her case?

• A)It is an ideal way to gain entry into a country where FDI is not limited by government regulations.
• B)It is a useful strategy to earn great returns from the know-how of a technologically complex process.
• C)It is an ideal way to establish a firm's long-term presence in a foreign country.
• D)It helps protect a firm's competitive advantage.
• E)The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to potential competitors.

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Definitions:

Credit Default Swap

A specific type of credit derivative where the underlying reference asset is a credit obligation such as a bond or a bank loan of a specific company. One counterparty (the protection buyer) makes a periodic payment (the credit default swap premium) to the second counterparty (the protection seller). If the underlying reference asset suffers a credit event such as bankruptcy, the protection seller will make a payment to the protection buyer. Credit default swaps allow protection buyers to hedge themselves against credit risk, and protection sellers to invest based on their assessment of credit risk.

Premium Rate

This refers to the additional cost above the standard rate charged by financial instruments or insurance policies, to cover additional risks or benefits.

Warrants

Securities that grant the holder the right to purchase the issuer's stock at a specified price within a certain time frame.

Exercise Price

The rate at which an option's owner is entitled to purchase or sell the base asset.