Question 1

FDI vertical integration is backward

Accepted Answer

A) when FDI involves an industry abroad that produces inputs for MNCs. 
B) when FDI involves an industry abroad that sells the MNC's outputs. 
C) none of the above 
A) when FDI involves an industry abroad that produces inputs for MNCs. 
B) when FDI involves an industry abroad that sells the MNC's outputs. 
C) none of the above

Question 2

The majority of foreign vertical integration is

Accepted Answer

A) backward. 
B) forward. 
C) sideways. 
D) none of the above 
A) backward. 
B) forward. 
C) sideways. 
D) none of the above

Question 3

Since shareholders of MNCs may indirectly benefit from corporate international diversification,

Accepted Answer

A) therefore firms are motivated to undertake FDI for the purpose of providing shareholders with diversification services. 
B) therefore firms are motivated to undertake FDI for the purpose of being part of the global minimum variance portfolio. 
C) therefore firms are motivated to undertake FDI for the purpose of staying on the efficient frontier. 
D) none of the above 
A) therefore firms are motivated to undertake FDI for the purpose of providing shareholders with diversification services. 
B) therefore firms are motivated to undertake FDI for the purpose of being part of the global minimum variance portfolio. 
C) therefore firms are motivated to undertake FDI for the purpose of staying on the efficient frontier. 
D) none of the above

Question 4

Prior to Honda's decision to build a plant in Ohio,

Accepted Answer

A) the Japanese government had been urging the automobile companies to begin production in the United States. 
B) the Japanese government had been urging the automobile companies to keep production in Japan. 
C) the Japanese government imposed import quotas on U.S.-made automobiles. 
D) none of the above 
A) the Japanese government had been urging the automobile companies to begin production in the United States. 
B) the Japanese government had been urging the automobile companies to keep production in Japan. 
C) the Japanese government imposed import quotas on U.S.-made automobiles. 
D) none of the above

Question 5

Unlike the theory of international trade or the theory of international portfolio investment,

Accepted Answer

A) we do not have a well-developed, comprehensive theory of FDI. 
B) the comprehensive theory of FDI focuses on mean-variance efficiency. 
C) the comprehensive theory of FDI is an arbitrage argument, like interest rate parity. 
D) none of the above 
A) we do not have a well-developed, comprehensive theory of FDI. 
B) the comprehensive theory of FDI focuses on mean-variance efficiency. 
C) the comprehensive theory of FDI is an arbitrage argument, like interest rate parity. 
D) none of the above

Question 6

According to the internalization theory of FDI

Accepted Answer

A) firms that have intangible assets with a public good property tend to invest directly in foreign countries. 
B) property rights in intangible assets are difficult to establish and protect, especially in foreign countries where legal recourse may not be readily available. 
C) both b) and a) 
D) none of the above 
A) firms that have intangible assets with a public good property tend to invest directly in foreign countries. 
B) property rights in intangible assets are difficult to establish and protect, especially in foreign countries where legal recourse may not be readily available. 
C) both b) and a) 
D) none of the above

Question 7

Which of the following statements is true about product life cycle theory?

Accepted Answer

A) In the early stages of the product life cycle, the demand for the new product is relatively insensitive to the price and thus a pioneering firm can charge a relatively high price. 
B) It predicts that over time the U.S.switches from an exporting country of new products to an importing country. 
C) It has an "S" shaped curve when plotting "quantity sold" versus "time". 
D) All of the above 
A) In the early stages of the product life cycle, the demand for the new product is relatively insensitive to the price and thus a pioneering firm can charge a relatively high price. 
B) It predicts that over time the U.S.switches from an exporting country of new products to an importing country. 
C) It has an "S" shaped curve when plotting "quantity sold" versus "time". 
D) All of the above

Question 8

Coca-Cola has invested in bottling plants all over the world rather than licensing local firms

Accepted Answer

A) because the foreigners can't be trusted to follow the secret recipe. 
B) because Coca-Cola wanted to protect the formula for its famous soft drink. 
C) because of the internalization theory of FDI. 
D) both b) and c) 
A) because the foreigners can't be trusted to follow the secret recipe. 
B) because Coca-Cola wanted to protect the formula for its famous soft drink. 
C) because of the internalization theory of FDI. 
D) both b) and c)

Question 9

The Ford Motor Company recently acquired Mazda,a Japanese auto maker,and Jaguar,a British auto maker.

Accepted Answer

A) This is an example of cross-border M&A. 
B) This was a Greenfield investment. 
C) both a) and b) 
D) none of the above 
A) This is an example of cross-border M&A. 
B) This was a Greenfield investment. 
C) both a) and b) 
D) none of the above

Question 10

Country risk refers to

Accepted Answer

A) political risk. 
B) credit risk, and other economic performances. 
C) every risk except political risk. 
D) both a) and b) 
A) political risk. 
B) credit risk, and other economic performances. 
C) every risk except political risk. 
D) both a) and b)

Question 11

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

Accepted Answer

A) the host country's policies affecting the local operations of an MNC. 
B) the host 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 the above 
A) the host country's policies affecting the local operations of an MNC. 
B) the host 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 the above

Question 12

International markets for goods and services are often imperfect.Which is the MOST common and MOST important?

Accepted Answer

A) Acts of governments 
B) Natural barriers like distance 
C) Cultural barriers 
D) Lack of knowledge 
A) Acts of governments 
B) Natural barriers like distance 
C) Cultural barriers 
D) Lack of knowledge

Question 13

Cross-border acquisitions are generally found to be synergy-generating corporate activities.

Accepted Answer

A) True 
 B)False

Question 14

In the 1960s,Coca-Cola,which had bottling plants in India,faced strong pressure from the Indian government to reveal the Coke formula as a condition for continued operations in India.As a result,

Accepted Answer

A) Coke agreed to reveal the formula to the Indian government, which has maintained it as a state secret to this day. 
B) instead of revealing the formula, Coke withdrew from the Indian market. 
C) Coke was able to successfully lobby the government to withdraw this demand. 
D) none of the above 
A) Coke agreed to reveal the formula to the Indian government, which has maintained it as a state secret to this day. 
B) instead of revealing the formula, Coke withdrew from the Indian market. 
C) Coke was able to successfully lobby the government to withdraw this demand. 
D) none of the above

Question 15

As a mode of FDI entry,cross-border M&A offers two key advantages over Greenfield investments:

Accepted Answer

A) speed and access to proprietary assets. 
B) firms bolster their competitive positions in the world market by acquiring special assets from other firms or using their own assets on a larger scale. 
C) firms can better leverage their intangible assets and on a larger scale. 
D) none of the above 
A) speed and access to proprietary assets. 
B) firms bolster their competitive positions in the world market by acquiring special assets from other firms or using their own assets on a larger scale. 
C) firms can better leverage their intangible assets and on a larger scale. 
D) none of the above

Question 16

Examples of intangible assets include

Accepted Answer

A) technological, managerial, and marketing know-how. 
B) superior R&D capabilities. 
C) brand names. 
D) all of the above 
A) technological, managerial, and marketing know-how. 
B) superior R&D capabilities. 
C) brand names. 
D) all of the above

Question 17

In evaluating political risk,experts focus their attention on a set of key factors such as

Accepted Answer

A) the host country's political/government system. 
B) historical records of political parties and their relative strengths. 
C) integration of the host country into the world political/economic system. 
D) all of the above 
A) the host country's political/government system. 
B) historical records of political parties and their relative strengths. 
C) integration of the host country into the world political/economic system. 
D) all of the above

Question 18

During the five-year period 2004-2008,total annual worldwide FDI outflows amounted to

Accepted Answer

A) About $1,423 million on average. 
B) About $1,423 billion on average. 
C) About $1,423 trillion on average. 
D) None of the above 
A) About $1,423 million on average. 
B) About $1,423 billion on average. 
C) About $1,423 trillion on average. 
D) None of the above

Question 19

The United States is the largest initiator,of FDI.The largest recipient of FDI is

Accepted Answer

A) also the United States. 
B) France. 
C) Germany. 
D) China. 
E) none of the above 
A) also the United States. 
B) France. 
C) Germany. 
D) China. 
E) none of the above

Question 20

The rapid increase in cross-border M&A deals can be attributed to

Accepted Answer

A) the end of the Greenfield era-we are running out of land. 
B) the lack of domestic investment opportunity. 
C) the ongoing liberalization of capital markets and the integration of the world economy. 
D) none of the above 
A) the end of the Greenfield era-we are running out of land. 
B) the lack of domestic investment opportunity. 
C) the ongoing liberalization of capital markets and the integration of the world economy. 
D) none of the above

Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

FDI vertical integration is backward

The majority of foreign vertical integration is

Since shareholders of MNCs may indirectly benefit from corporate international diversification,

Prior to Honda's decision to build a plant in Ohio,

Unlike the theory of international trade or the theory of international portfolio investment,

According to the internalization theory of FDI

Which of the following statements is true about product life cycle theory?

Coca-Cola has invested in bottling plants all over the world rather than licensing local firms

The Ford Motor Company recently acquired Mazda,a Japanese auto maker,and Jaguar,a British auto maker.

Country risk refers to

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

International markets for goods and services are often imperfect.Which is the MOST common and MOST important?

Cross-border acquisitions are generally found to be synergy-generating corporate activities.

In the 1960s,Coca-Cola,which had bottling plants in India,faced strong pressure from the Indian government to reveal the Coke formula as a condition for continued operations in India.As a result,

As a mode of FDI entry,cross-border M&A offers two key advantages over Greenfield investments:

Examples of intangible assets include

In evaluating political risk,experts focus their attention on a set of key factors such as

During the five-year period 2004-2008,total annual worldwide FDI outflows amounted to

The United States is the largest initiator,of FDI.The largest recipient of FDI is

The rapid increase in cross-border M&A deals can be attributed to

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

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