APQ is a multinational company. It makes chemicals that are sold to farmers which help increase the amount of food produced. It plans to open a factory in country X, a developing country with low interest rates. The Finance Director said: ‘This factory will create many external benefits. APQ is a public limited company which tries to act in an ethical way with all its stakeholder groups.' The new factory will cost $100m and there will be an opportunity cost for APQ. The Finance Director cannot decide which source of finance to use for the new factory.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2016). The mark or mark type is shown in brackets.

1. [2] Clear understanding, e.g. next best alternative forgone OR next best alternative given up (by choosing another item)
2. [1] Some understanding, e.g. what had to give up OR option not chosen
3. [1] Jobs created/lower unemployment
4. [1] More choice of chemicals for farmers
5. [1] higher amount of food possible
6. [1] Infrastructure/more roads
7. [1] Increase orders for suppliers
8. [1] Help attract other (chemical) businesses to area
9. [1] Taxes paid to government
10. [1] Increase skills of local people/training
11. [1] Reduce imports/could increase exports
12. [1] Assist economic growth
13. [1] Bring new technology into country
14. [2] Access to new market/increase sales/market share [k] as people need food [app]
15. [2] Reduce production costs, e.g. lower labour costs OR lower health and safety costs OR land costs [k] as X is a developing country [app]
16. [2] Spread risk [k] when selling chemicals [app]
17. [2] Easier access to raw materials [k] for all its factories [app]
18. [2] Avoid barriers to trade [k]
19. [2] Remain competitive [k]
20. [2] Reduce transport costs (as can produce goods nearer market)
21. [2] Economies of scale, e.g. purchasing, finance [k] (only once)
22. [2] Reduce tax liability/take advantage of favourable tax laws
23. [2] Access government grants [k]
24. [3] Employees/management [k] if set up in developing country [app] should pay fair wages [an] or offer good conditions [an]
25. [3] Suppliers [k] pay fair price/pay on time [an] for the chemicals [app]
26. [3] Community [k]
27. [3] Pressure groups [k] by trying to prevent pollution/environmental damage [an] caused by factory [app]
28. [3] Government [k] paying its taxes on time/not do tax avoidance [an]
29. [3] Lenders/bank [k] if borrow $100 m [app]
30. [3] Owners/shareholders [k] as public limited company [app]
31. [3] Customers [k] do not exploit them by charging high prices [an] to farmers [app]
32. [2] Retained Profits [k] so no need to repay [an] so keeps costs lower [an]
33. [2] Bank loan [k] as interest rates low [app] but it will increase level of debt [an] OR as multinational [app] banks more likely to lend at lower rates of interest [an]
34. [2] Government grant/subsidy [k] as helping country develop [app] so may be willing to provide finance [an]
35. [2] mortgage [k] as cost $100m [app] so have time to make repayments [an]
36. [2] Leasing [k] so no large payment at the start [an]
37. [2] Share issue [k] as it is a public limited company [app]
38. [1] Debentures [k]
39. [1] Sale of unused non-current assets [k]