Cyclane’s chief operating officer thinks that the company should begin

QUESTION

Cyclane’s chief operating officer thinks that the company should begin international operations by looking to acquire an existing company in another country, arguing that this will save money.

Which of the following, if true, strengthens the COO’s argument?
A) Cyclane will have to pay a premium above the company’s market price in order to acquire it.
B) Acquiring another company will enable Cyclane to use existing production facilities.
C) Acquiring another company is much more complicated internationally than domestically.
D) Acquiring another company overseas can give the impression of American cultural imperialism.
E) Acquiring another company greatly increases the complexity of the purchasing company’s operations.

ANSWER

Answer: B
Explanation: B) If acquiring a company means that Cyclane can use existing production facilities, then it will save money on having to build new production facilities. The other choices point out drawbacks to foreign acquisitions and thus weaken the case that the company can save money overall by acquiring an existing company.