Question 1

Cross-border acquisitions of businesses are a politically sensitive issue,

Accepted Answer

A) as most countries prefer to retain foreign control of domestic firms. 
B) as most countries prefer to retain local control of domestic firms. 
C) as most countries prefer to retain local control of foreign firms. 
D) none of the above 
A) as most countries prefer to retain foreign control of domestic firms. 
B) as most countries prefer to retain local control of domestic firms. 
C) as most countries prefer to retain local control of foreign firms. 
D) none of the above

Question 2

If cross-border acquisitions generate synergistic gains,

Accepted Answer

A) then both the acquiring and target shareholders gain wealth at the same time. 
B) then one can argue that cross-border acquisitions are mutually beneficial and thus should not be thwarted both from a national and global perspective. 
C) then the value of the combined firm is greater than the stand-alone valuations of the individual (acquiring and target) firms. 
D) all of the above. 
A) then both the acquiring and target shareholders gain wealth at the same time. 
B) then one can argue that cross-border acquisitions are mutually beneficial and thus should not be thwarted both from a national and global perspective. 
C) then the value of the combined firm is greater than the stand-alone valuations of the individual (acquiring and target) firms. 
D) all of the above.

Question 3

Examples of control risk include

Accepted Answer

A) the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments. 
B) unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities. 
C) restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs. 
D) none of the above 
A) the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments. 
B) unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities. 
C) restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs. 
D) none of the above

Question 4

Also,MNCs often find it profitable to locate manufacturing/processing facilities near

Accepted Answer

A) the home office to exploit their assets in place. 
B) the natural resources in order to save transportation costs. 
C) their competitor's manufacturing plant to even out the playing field with regard to shipping costs. 
D) none of the above 
A) the home office to exploit their assets in place. 
B) the natural resources in order to save transportation costs. 
C) their competitor's manufacturing plant to even out the playing field with regard to shipping costs. 
D) none of the above

Question 5

Honda's decision to build a plant in Ohio

Accepted Answer

A) was welcomed by the United Auto Workers. 
B) was encouraged by assistance from the state of Ohio, including improved infrastructure around the plant and abatement of property taxes. 
C) involved setting up a special foreign trade zone that allowed Honda to import auto parts from Japan at a reduced tariff rate. 
D) all of the above 
A) was welcomed by the United Auto Workers. 
B) was encouraged by assistance from the state of Ohio, including improved infrastructure around the plant and abatement of property taxes. 
C) involved setting up a special foreign trade zone that allowed Honda to import auto parts from Japan at a reduced tariff rate. 
D) all of the above

Question 6

Firms that have intangible assets with a public good property tend to invest directly in foreign countries.This is because

Accepted Answer

A) in order to use these assets on a larger scale. 
B) to avoid the misappropriation that may occur while transacting in foreign countries through the market mechanism. 
C) all of the above 
A) in order to use these assets on a larger scale. 
B) to avoid the misappropriation that may occur while transacting in foreign countries through the market mechanism. 
C) all of the above

Question 7

In the early 1980s,Honda,the Japanese automobile company,built an assembly plant in Marysville,Ohio,and began to produce cars for the North American market.As the production capacity at the Ohio plant expanded,Honda began to export its U.S.-manufactured cars to Japan.

Accepted Answer

A) True 
 B)False

Question 8

An example of forward vertical FDI

Accepted Answer

A) U.S.car makers built their own network of dealerships in Japan to help sell their cars. 
B) U.S.car makers began to source parts in Japan to lower the cost of their cars. 
C) U.S.car makers entered into joint partnerships with car makers in Japan to help sell their cars. 
D) None of the above 
A) U.S.car makers built their own network of dealerships in Japan to help sell their cars. 
B) U.S.car makers began to source parts in Japan to lower the cost of their cars. 
C) U.S.car makers entered into joint partnerships with car makers in Japan to help sell their cars. 
D) None of the above

Question 9

In 1992,the Enron Development Corporation,a subsidiary of the Houston-based energy company,signed a contract to build the largest-ever power plant in India,requiring a total investment of $2.8 billion.After Enron had spent nearly $300 million,the project was canceled by Hindu nationalist politicians in the Maharashtra state where the plant was to be built.Which of the following is true?

Accepted Answer

A) This move by the government played well with Indian voters with visceral distrust of foreign companies since the British colonial era. 
B) This move by the government was widely criticized in India on the grounds that it would deter future foreign investment. 
C) This move by the government was widely criticized in India on the grounds that severe power shortages have been one of the bottlenecks hindering India's economic growth. 
D) None of the above 
A) This move by the government played well with Indian voters with visceral distrust of foreign companies since the British colonial era. 
B) This move by the government was widely criticized in India on the grounds that it would deter future foreign investment. 
C) This move by the government was widely criticized in India on the grounds that severe power shortages have been one of the bottlenecks hindering India's economic growth. 
D) None of the above

Question 10

Japan plays a major role as an exporter of FDI.As a recipient of FDI,

Accepted Answer

A) Japan receives as much FDI as it exports, making it a major player on both fronts. 
B) Japan plays a relatively minor role, reflecting a variety of legal, economic, and cultural barriers to FDI. 
C) Japan's receipts of FDI are third in the world. 
D) None of the above 
A) Japan receives as much FDI as it exports, making it a major player on both fronts. 
B) Japan plays a relatively minor role, reflecting a variety of legal, economic, and cultural barriers to FDI. 
C) Japan's receipts of FDI are third in the world. 
D) None of the above

Question 11

As a mode of entry into a foreign market,cross-border acquisition

Accepted Answer

A) involves building new production facilities in a foreign country. 
B) offer faster speed over Greenfield investment. 
C) can offer access to proprietary assets. 
D) both b) and c) 
A) involves building new production facilities in a foreign country. 
B) offer faster speed over Greenfield investment. 
C) can offer access to proprietary assets. 
D) both b) and c)

Question 12

When evaluating a foreign investment project,it is important for the MNC to consider the effect of political risk,as a sovereign country can change "the rules of the game".To account for this

Accepted Answer

A) the MNC may adjust the cost of capital upward. 
B) the MNC may lower the expected cash flows from the foreign project. 
C) the MNC may purchase insurance policies against the hazard of political risks. 
D) all of the above 
A) the MNC may adjust the cost of capital upward. 
B) the MNC may lower the expected cash flows from the foreign project. 
C) the MNC may purchase insurance policies against the hazard of political risks. 
D) all of the above

Question 13

MNCs might have been lured to invest in China not only by lower labor and material costs but also

Accepted Answer

A) by China's lower labor and material costs. 
B) by the desire to preempt the entry of rivals into China's potentially huge market. 
C) by the Kung Pao chicken. 
D) by the desire to see, if not buy, all the tea in China. 
A) by China's lower labor and material costs. 
B) by the desire to preempt the entry of rivals into China's potentially huge market. 
C) by the Kung Pao chicken. 
D) by the desire to see, if not buy, all the tea in China.

Question 14

MNCs have invested in China

Accepted Answer

A) by lower material costs. 
B) by lower labor costs. 
C) by a desire to preempt the entry of rivals into China's potentially huge market. 
D) all of the above 
A) by lower material costs. 
B) by lower labor costs. 
C) by a desire to preempt the entry of rivals into China's potentially huge market. 
D) all of the above

Question 15

Factors of production include land,labor,capital,and entrepreneurial ability.Of all the factor markets,the MOST IMPERFECT is the

Accepted Answer

A) labor market. 
B) capital market. 
C) real estate market. 
D) market for entrepreneurial ability. 
A) labor market. 
B) capital market. 
C) real estate market. 
D) market for entrepreneurial ability.

Question 16

Countries may welcome Greenfield investments,

Accepted Answer

A) as they are viewed as representing new investment and employment opportunities. 
B) as they are viewed as substitutes for foreign firms' bids to acquire domestic firms. 
C) but they are also often resisted and sometimes even resented by the local firms. 
D) none of the above 
A) as they are viewed as representing new investment and employment opportunities. 
B) as they are viewed as substitutes for foreign firms' bids to acquire domestic firms. 
C) but they are also often resisted and sometimes even resented by the local firms. 
D) none of the above

Question 17

The communist victory in China in 1949 is an example of

Accepted Answer

A) micro risk. 
B) macro risk. 
C) both a) and b) 
D) none of the above 
A) micro risk. 
B) macro risk. 
C) both a) and b) 
D) none of the above

Question 18

Imperfections in the market for intangible assets can also play a major role in motivating firms to undertake cross-border acquisitions.According to the internalization theory,

Accepted Answer

A) cross-border acquisitions may also be motivated by the acquirer's desire to acquire and internalize the target firm's intangible assets. 
B) a firm with intangible assets that have a public good property such as technical and managerial know-how may acquire foreign firms as a platform for using its special assets on a larger scale and, at the same time, avoid the misappropriation that may occur while transacting in foreign markets through a market mechanism. 
C) the internalization thus may proceed forward to internalize the acquirer's assets, or backward to internalize the target's assets. 
D) all of the above 
A) cross-border acquisitions may also be motivated by the acquirer's desire to acquire and internalize the target firm's intangible assets. 
B) a firm with intangible assets that have a public good property such as technical and managerial know-how may acquire foreign firms as a platform for using its special assets on a larger scale and, at the same time, avoid the misappropriation that may occur while transacting in foreign markets through a market mechanism. 
C) the internalization thus may proceed forward to internalize the acquirer's assets, or backward to internalize the target's assets. 
D) all of the above

Question 19

Intangible assets are often hard to package and sell to foreigners

Accepted Answer

A) because they usually default on the contracts that they sign. 
B) as a result, there is more FDI than there might otherwise be. 
C) because property rights in intangible assets are difficult to establish and protect, especially in foreign countries where legal recourse may not be readily available. 
D) both b) and c) 
A) because they usually default on the contracts that they sign. 
B) as a result, there is more FDI than there might otherwise be. 
C) because property rights in intangible assets are difficult to establish and protect, especially in foreign countries where legal recourse may not be readily available. 
D) both b) and c)

Question 20

Why do firms locate production overseas rather than exporting finished goods?

Accepted Answer

A) Shipping costs 
B) Firms seek to extend corporate control overseas 
C) Imperfect factor markets 
D) All of the above 
A) Shipping costs 
B) Firms seek to extend corporate control overseas 
C) Imperfect factor markets 
D) All of the above

Cross-border acquisitions of businesses are a politically sensitive issue,

If cross-border acquisitions generate synergistic gains,

Examples of control risk include

Also,MNCs often find it profitable to locate manufacturing/processing facilities near

Honda's decision to build a plant in Ohio

Firms that have intangible assets with a public good property tend to invest directly in foreign countries.This is because

In the early 1980s,Honda,the Japanese automobile company,built an assembly plant in Marysville,Ohio,and began to produce cars for the North American market.As the production capacity at the Ohio plant expanded,Honda began to export its U.S.-manufactured cars to Japan.

An example of forward vertical FDI

Japan plays a major role as an exporter of FDI.As a recipient of FDI,

As a mode of entry into a foreign market,cross-border acquisition

When evaluating a foreign investment project,it is important for the MNC to consider the effect of political risk,as a sovereign country can change "the rules of the game".To account for this

MNCs might have been lured to invest in China not only by lower labor and material costs but also

MNCs have invested in China

Factors of production include land,labor,capital,and entrepreneurial ability.Of all the factor markets,the MOST IMPERFECT is the

Countries may welcome Greenfield investments,

The communist victory in China in 1949 is an example of

Imperfections in the market for intangible assets can also play a major role in motivating firms to undertake cross-border acquisitions.According to the internalization theory,

Intangible assets are often hard to package and sell to foreigners

Why do firms locate production overseas rather than exporting finished goods?

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

Cross-border acquisitions of businesses are a politically sensitive issue,

If cross-border acquisitions generate synergistic gains,

Examples of control risk include

Also,MNCs often find it profitable to locate manufacturing/processing facilities near

Honda's decision to build a plant in Ohio

Firms that have intangible assets with a public good property tend to invest directly in foreign countries.This is because

In the early 1980s,Honda,the Japanese automobile company,built an assembly plant in Marysville,Ohio,and began to produce cars for the North American market.As the production capacity at the Ohio plant expanded,Honda began to export its U.S.-manufactured cars to Japan.

An example of forward vertical FDI

Japan plays a major role as an exporter of FDI.As a recipient of FDI,

As a mode of entry into a foreign market,cross-border acquisition

When evaluating a foreign investment project,it is important for the MNC to consider the effect of political risk,as a sovereign country can change "the rules of the game".To account for this

MNCs might have been lured to invest in China not only by lower labor and material costs but also

MNCs have invested in China

Factors of production include land,labor,capital,and entrepreneurial ability.Of all the factor markets,the MOST IMPERFECT is the

Countries may welcome Greenfield investments,

The communist victory in China in 1949 is an example of

Imperfections in the market for intangible assets can also play a major role in motivating firms to undertake cross-border acquisitions.According to the internalization theory,

Intangible assets are often hard to package and sell to foreigners

Why do firms locate production overseas rather than exporting finished goods?

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters