Cyclane’s chief financial officer thinks that the company should consi

QUESTION

Cyclane’s chief financial officer thinks that the company should consider engaging in FDI by constructing new facilities in another country. She argues that government incentives may be available to offset the additional cost in this endeavor.

Which of the following, if true, strengthens the CFO’s argument?
A) Government incentives are usually available only to companies that support a country’s political activities.
B) Pharmaceutical companies often have to overcome legal hurdles to operate facilities internationally.
C) In many countries, the public is not favorable to American companies’ building proposals.
D) Building new production facilities has a significant potential for job creation.
E) Engaging in FDI often involves more risk than does domestic investment.

ANSWER

Answer: D
Explanation: D) Governments are likely to offer incentives to companies that construct new facilities if doing so has a potential for local job creation. Choices A and C weaken the case that governments would offer incentives to foreign companies to build new facilities. Choices B and E are not relevant to the issue of government incentives for creation of new facilities by foreign companies.