With licensing the ________ is likely to be lower than with FDI because of lower profits; however, the ________ is likely to be higher due to a greater return per dollar invested.
A) IRR; NPV
B) NPV; IRR
C) cost of capital; NPV
D) IRR; cost of capital

Question

Quizplus · Accepted Answer

Licensing involves lower profits, so the NPV is likely to be lower than with FDI. However, the return per dollar invested is likely to be higher, which would increase the IRR. Therefore, choice B correctly identifies that the NPV would be lower but the IRR would be higher with licensing compared to FDI.

With Licensing the ________ Is Likely to Be Lower Than