APQ is a multinational company. It produces chemicals that are sold to farmers, helping them to increase food output. It intends to set up a factory in country X, a developing country with low interest rates. The Finance Director said: ‘This factory will generate many external benefits. APQ is a public limited company that aims to behave ethically towards all of its stakeholders.’ The new factory will cost $100m and APQ will face an opportunity cost. The Finance Director cannot decide which source of finance should be chosen for the new factory.
(a)[2]
What does the term ‘opportunity cost’ mean?
(b)[2]
Identify two potential external benefits that could arise from the new factory.
(c)[4]
Identify and explain two advantages to APQ of operating as a multinational company.
(d)[6]
Identify two stakeholder groups of APQ. Explain how APQ could behave ethically towards each stakeholder group.
(e)[6]
Explain two appropriate sources of finance that APQ could choose for the new factory. Recommend which source of finance APQ ought to use. Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The next-best alternative given up when a choice is made” …