2015年6月ACCA P4考试真题答案.pdfVIP

Answers Professional Level – Options Module, Paper P4 Advanced Financial Management June 2015 Answers 1 (a) Benefits of own investment as opposed to licensing Imoni Co may be able to benefit from setting up its own plant as opposed to licensing in a number of ways. Yilandwe wants to attract foreign investment and is willing to offer a number of financial concessions to foreign investors which may not be available to local companies. The company may be able to control the quality of the components more easily, and offer better and targeted training facilities if it has direct control of the labour resources. The company may also be able to maintain the confidentiality of its products, whereas assigning the assembly rights to another company may allow that company to imitate the products more easily. Investing internationally may provide opportunities for risk diversification, especially if Imoni Co’s shareholders are not well-diversified internationally themselves. Finally, direct investment may provide Imoni Co with new opportunities in the future, such as follow-on options. Drawbacks of own investment as opposed to licensing Direct investment in a new plant will probably require higher, upfront costs from Imoni Co compared to licensing the assembly rights to a local manufacturer. It may be able to utilise these saved costs on other projects. Imoni Co will most likely be exposed to higher risks involved with international investment such as political risks, cultural risks and legal risks. With licensing these risks may be reduced somewhat. The licensee, because it would be a local company, may understand the operational systems of doing business in Yilandwe better. It will therefore