In Which of the Following Cases Is Outsourcing Likely to Be

question 31

Multiple Choice

In which of the following cases is outsourcing likely to be the best solution to the firm's data processing needs?

• A) Sad Clown Pajamas produces and wholesales clothing products to retailers worldwide. Eighty percent of its sales orders are taken during the months of October and November. Sad Clown requires a system that will manage online ordering and fulfillment.
• B) Modest Expectations Investment Services manages highly diverse portfolios and provides personal services to high income investors worldwide. The firm needs a system that will pull together selected investment data from a large variety of sources and allow account managers to prepare customized reports for customers.
• C) J.D. Yacht is in the business of buying businesses, managing them for no more than two years, and then selling them at a profit. The firm requires a flexible system that will allow them to effectively manage the various types of businesses it controls.
• D) Halide Construction, LLC, manages the design and construction of desalinization plants and requires a system that will allow it to manage the process from bid to billing.

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Definitions:

Profitability Index

A financial metric used to evaluate the desirability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Payback Period

The duration required for an investment to generate cash flows sufficient to recover its initial cost.

AAR

Average Annual Return, which measures the average return generated by an investment per year over a specified period.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows.