Chartered Financial Analyst Level 2

Explanation

Correct Answer: B - Joint Venture

Analysis:

• Acquisition (Option A): Involves purchasing the entire company, which typically requires substantial capital investment and provides full control. However, the question specifies a "modest investment," which suggests a smaller financial commitment than a full acquisition.

• Joint Venture (Option B): This is the most appropriate choice because:

  • It allows for a modest investment by sharing costs with another partner
  • Provides meaningful operational control through shared management and decision-making structures
  • Enables strategic collaboration with complementary businesses
  • Offers flexibility in structuring the investment and control arrangements

• Minority Equity Investment (Option C): While this involves a modest investment, it typically provides limited operational control since the investor holds a minority stake without significant management influence.

Key Factors:

• Modest investment requirement eliminates full acquisition
• Meaningful operational control requirement eliminates minority equity investment
• Complementary and strategic business focus aligns well with joint venture structures

Joint ventures allow companies to achieve strategic objectives while controlling investment size and maintaining operational influence through shared governance arrangements.