Question 1

What percentage of FDI originated in developed countries during the past decade?

Accepted Answer

A)  60% 
B)  80% 
C)  90% 
D)  95% 
A)  60% 
B)  80% 
C)  90% 
D)  95% C

Question 2

How can Export Development Canada (EDC)help firms to deal with political risk?

Accepted Answer

The EDC,a crown corporation,offers insurance against the inconvertibility of foreign currencies,the expropriation of Canadian-owned assets overseas,the destruction of Canadian-owned physical properties due to war,revolution,and other violent political events in foreign countries,and loss of business income due to political violence.This insurance may allow firms to invest in politically risky countries that they may not enter otherwise.The cost of the insurance premium must be included in the capital budgeting analysis since it represents an incremental cash outflow.

Question 3

Transfer risk refers to the risk which arises from the uncertainty about:

Accepted Answer

A)  the host's country's policies affecting the local operations of an MNC. 
B)  the host's country's policy regarding ownership and control of local operations. 
C)  cross-border flows of capital, payment, know-how, and the like. 
D)  None of these. 
A)  the host's country's policies affecting the local operations of an MNC. 
B)  the host's country's policy regarding ownership and control of local operations. 
C)  cross-border flows of capital, payment, know-how, and the like. 
D)  None of these. C

Question 4

Greenfield investment:

Accepted Answer

A)  is an investment in agricultural industry. 
B)  is an investment in a an environmentally friendly technology. 
C)  can be a result of a cross-border acquisition of any existing and operational business abroad. 
D)  None of these. 
A)  is an investment in agricultural industry. 
B)  is an investment in a an environmentally friendly technology. 
C)  can be a result of a cross-border acquisition of any existing and operational business abroad. 
D)  None of these.

Question 5

Which of the following is an example of a transfer risk:

Accepted Answer

A)  Risk of involuntary transfer of the firm's ownership from foreign shareholders to the government of the host country through expropriation. 
B)  A possibility that the host country government will impose the restriction on the percentage of the foreign ownership in which case new equity must be issued and the current foreign shareholders will effectively lose control over the firm although they will be compensated for their shares of control over the firm. 
C)  Risk that the firm's shares will not be allowed to be listed on the host country stock exchange, which reduces the ability to freely transfer the ownership. 
D)  Restriction on the cross-border flow of capital. 
A)  Risk of involuntary transfer of the firm's ownership from foreign shareholders to the government of the host country through expropriation. 
B)  A possibility that the host country government will impose the restriction on the percentage of the foreign ownership in which case new equity must be issued and the current foreign shareholders will effectively lose control over the firm although they will be compensated for their shares of control over the firm. 
C)  Risk that the firm's shares will not be allowed to be listed on the host country stock exchange, which reduces the ability to freely transfer the ownership. 
D)  Restriction on the cross-border flow of capital.

Question 6

Control risk refers to the risk which arises from the uncertainty about:

Accepted Answer

A)  the host's country's policies affecting the local operations of an MNC. 
B)  the host's country's policy regarding ownership and control of local operations. 
C)  cross-border flows of capital, payment, know-how, and the like. 
D)  None of these. 
A)  the host's country's policies affecting the local operations of an MNC. 
B)  the host's country's policy regarding ownership and control of local operations. 
C)  cross-border flows of capital, payment, know-how, and the like. 
D)  None of these.

Question 7

Corruption is all of the following except:

Accepted Answer

A)  a type of political risk. 
B)  illegal for Canadians abroad. 
C)  illegal in Canada. 
D)  Not a serious problem. 
A)  a type of political risk. 
B)  illegal for Canadians abroad. 
C)  illegal in Canada. 
D)  Not a serious problem.

Question 8

Political risk refers to:

Accepted Answer

A)  the potential losses to the parent firm of an MNC resulting from adverse political developments in the host country. 
B)  macro-economic risks. 
C)  micro-economic risks. 
D)  bankruptcy or high inflation rates. 
A)  the potential losses to the parent firm of an MNC resulting from adverse political developments in the host country. 
B)  macro-economic risks. 
C)  micro-economic risks. 
D)  bankruptcy or high inflation rates.

Question 9

The most important mode of entering into a foreign market via FDI in the last few years is:

Accepted Answer

A)  greenfield investments. 
B)  brownfield investments. 
C)  mergers & acquisitions. 
D)  All modes are equally important. 
A)  greenfield investments. 
B)  brownfield investments. 
C)  mergers & acquisitions. 
D)  All modes are equally important.

Question 10

Which of the following is not an example of a political risk?

Accepted Answer

A)  Expropriation. 
B)  Change in tax law. 
C)  An unanticipated depreciation of the foreign currency. 
D)  All of the these are examples of political risk. 
A)  Expropriation. 
B)  Change in tax law. 
C)  An unanticipated depreciation of the foreign currency. 
D)  All of the these are examples of political risk.

Question 11

The communist victory in China in 1949 is an example of:

Accepted Answer

A)  micro risk. 
B)  macro risk. 
C)  both micro and macro risk. 
D)  None of these. 
A)  micro risk. 
B)  macro risk. 
C)  both micro and macro risk. 
D)  None of these.

Question 12

Operational risk refers to the risk which arises from the uncertainty about:

Accepted Answer

A)  the host's country's policies affecting the local operations of an MNC. 
B)  the host's country's policy regarding ownership and control of local operations. 
C)  cross-border flows of capital, payment, know-how, and the like. 
D)  None of these. 
A)  the host's country's policies affecting the local operations of an MNC. 
B)  the host's country's policy regarding ownership and control of local operations. 
C)  cross-border flows of capital, payment, know-how, and the like. 
D)  None of these.

Question 13

ABC Inc.,located in Vancouver,BC wants to buy XYZ Inc.,located in Seattle,WA.What does the ABC Inc.have to consider so that the acquisition will be successful?

Accepted Answer

A successful acquisition implies that sh

Question 14

Explain political risk and its three main classifications.How can political risk be incorporated in the decision making process when firms decide on whether to invest in foreign project or not?

Accepted Answer

Political risk refers to the potential l

Question 15

Cross-border acquisition involves:

Accepted Answer

A)  building new production facilities in a foreign country. 
B)  buying existing foreign business. 
C)  purchasing minor intangible assets in existing foreign business. 
D)  None of these. 
A)  building new production facilities in a foreign country. 
B)  buying existing foreign business. 
C)  purchasing minor intangible assets in existing foreign business. 
D)  None of these.

Question 16

An increase in political risk can be managed by:

Accepted Answer

A)  adjusting a foreign investment project's NPV by either reducing its expected cash flows, or by increasing the cost of capital. 
B)  forming joint venture with a local company. 
C)  purchasing insurance against the hazard of political risk. 
D)  All of these. 
A)  adjusting a foreign investment project's NPV by either reducing its expected cash flows, or by increasing the cost of capital. 
B)  forming joint venture with a local company. 
C)  purchasing insurance against the hazard of political risk. 
D)  All of these.

Question 17

Synergistic gains refer to:

Accepted Answer

A)  gains from hedging. 
B)  gains obtained when the value of the acquiring and target firms, combined together, is greater than the stand-alone valuations of the individual firms. 
C)  gains arising if the companies can save on the costs of production, marketing, distribution, and R&D standalone. 
D)  gains obtained when the companies face together into a competition for a particular product market. 
A)  gains from hedging. 
B)  gains obtained when the value of the acquiring and target firms, combined together, is greater than the stand-alone valuations of the individual firms. 
C)  gains arising if the companies can save on the costs of production, marketing, distribution, and R&D standalone. 
D)  gains obtained when the companies face together into a competition for a particular product market.

Question 18

How can firms establish a wholly owned subsidiary in a foreign country?
 What are the advantages and disadvantages of each method?

Accepted Answer

Firms can engage in greenfield investmen

Question 19

The key factors that are important in a firm's decision to invest overseas are:

Accepted Answer

A)  Trade barriers, perfect labor market, and tangible assets. 
B)  product integration, product life cycle, and shareholder unification services. 
C)  profit maximization, global prestige, and competition. 
D)  Trade barriers, imperfect labor market, intangible assets, vertical integration, product life cycle, and shareholder diversification. 
A)  Trade barriers, perfect labor market, and tangible assets. 
B)  product integration, product life cycle, and shareholder unification services. 
C)  profit maximization, global prestige, and competition. 
D)  Trade barriers, imperfect labor market, intangible assets, vertical integration, product life cycle, and shareholder diversification.

Question 20

Some of the risks that a Canadian based MNC can encounter in its foreign investments are: (i)- an increase in the cost of borrowing due to a rise in interest rates.
(ii)- increase in inflation rates.
(iii)- dumping.
(iv)- unfair competition by local companies.
(v)- inconvertibility of foreign currencies.
(vi)- expropriation.
(vii)- destruction of properties due to war,revolution,and other violent political events in foreign countries.
(viii)- loss of business income due to political violence.
In Canada,the Export Development Canada (EDC)offers insurance against which of the above:

Accepted Answer

A)  (i), (ii), (iii), and (iv) 
B)  (v), (vi), (vii), and (viii) 
C)  (iv), (v), (vi), and (vii) 
D)  None of these. 
A)  (i), (ii), (iii), and (iv) 
B)  (v), (vi), (vii), and (viii) 
C)  (iv), (v), (vi), and (vii) 
D)  None of these.

What percentage of FDI originated in developed countries during the past decade?

How can Export Development Canada (EDC)help firms to deal with political risk?

Transfer risk refers to the risk which arises from the uncertainty about:

Greenfield investment:

Which of the following is an example of a transfer risk:

Control risk refers to the risk which arises from the uncertainty about:

Corruption is all of the following except:

Political risk refers to:

The most important mode of entering into a foreign market via FDI in the last few years is:

Which of the following is not an example of a political risk?

The communist victory in China in 1949 is an example of:

Operational risk refers to the risk which arises from the uncertainty about:

ABC Inc.,located in Vancouver,BC wants to buy XYZ Inc.,located in Seattle,WA.What does the ABC Inc.have to consider so that the acquisition will be successful?

Explain political risk and its three main classifications.How can political risk be incorporated in the decision making process when firms decide on whether to invest in foreign project or not?

Cross-border acquisition involves:

An increase in political risk can be managed by:

Synergistic gains refer to:

How can firms establish a wholly owned subsidiary in a foreign country? What are the advantages and disadvantages of each method?

The key factors that are important in a firm's decision to invest overseas are:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters

Exam 15: Foreign Direct Investment and Cross-Border Acquisitions

What percentage of FDI originated in developed countries during the past decade?

How can Export Development Canada (EDC)help firms to deal with political risk?

Transfer risk refers to the risk which arises from the uncertainty about:

Greenfield investment:

Which of the following is an example of a transfer risk:

Control risk refers to the risk which arises from the uncertainty about:

Corruption is all of the following except:

Political risk refers to:

The most important mode of entering into a foreign market via FDI in the last few years is:

Which of the following is not an example of a political risk?

The communist victory in China in 1949 is an example of:

Operational risk refers to the risk which arises from the uncertainty about:

ABC Inc.,located in Vancouver,BC wants to buy XYZ Inc.,located in Seattle,WA.What does the ABC Inc.have to consider so that the acquisition will be successful?

Explain political risk and its three main classifications.How can political risk be incorporated in the decision making process when firms decide on whether to invest in foreign project or not?

Cross-border acquisition involves:

An increase in political risk can be managed by:

Synergistic gains refer to:

How can firms establish a wholly owned subsidiary in a foreign country? What are the advantages and disadvantages of each method?

The key factors that are important in a firm's decision to invest overseas are:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters