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

contract it out to an independent supplier. Manufacturing the part

requires a nonrecoverable investment in specialized assets. The most

efficient suppliers are located in countries with currencies that many

foreign exchange analysts expect to appreciate substantially over the

next decade. 

What are the pros and cons of

 (a) manufacturing the

component in-house and 

(b) outsourcing manufacturing to an

independent supplier? 

Which option would you recommend? Why?