A firm must choose whether to make a component part in-house

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A firm must choose whether to make a component part in-house or to contract it out to an independent supplier. Manufacturing the part needs a non-recoverable investment in specialized assets. The well-organized suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros as well as cons of (a) manufacturing the component in-house and (b) outsourcing manufacture to an independent supplier? Which choice would you recommend? Why?

Reference no: EM1379871

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