Question 1

Cross-border acquisition involves

Accepted Answer

A) building new production facilities in a foreign country. 
B) buying an existing foreign business. 
C) building new production facilities in a foreign country and buying an existing foreign business. 
D) none of the options 
A) building new production facilities in a foreign country. 
B) buying an existing foreign business. 
C) building new production facilities in a foreign country and buying an existing foreign business. 
D) none of the options B

Question 2

Following Honda's FDI in the U.S.,

Accepted Answer

A) the U.S.government imposed a Voluntary Restraint Agreement under which Japanese automobile manufacturers were not allowed to increase their exports to the U.S.market. 
B) Toyota and Nissan made direct investments in America. 
C) sales of Hondas declined. 
D) none of the options 
A) the U.S.government imposed a Voluntary Restraint Agreement under which Japanese automobile manufacturers were not allowed to increase their exports to the U.S.market. 
B) Toyota and Nissan made direct investments in America. 
C) sales of Hondas declined. 
D) none of the options B

Question 3

The third most important source of FDI outflows is

Accepted Answer

A) the United States. 
B) Japan. 
C) China. 
D) Mexico. 
A) the United States. 
B) Japan. 
C) China. 
D) Mexico. C

Question 4

In a push to serve the North American market Samsung,a Korean firm,chose to locate production facilities in Mexico,mainly because

Accepted Answer

A) of lower labor costs in Mexico. 
B) to circumvent trade barriers imposed by NAFTA. 
C) because of colder weather in Canada. 
D) none of the options 
A) of lower labor costs in Mexico. 
B) to circumvent trade barriers imposed by NAFTA. 
C) because of colder weather in Canada. 
D) none of the options

Question 5

Labor services in a country might be underpriced relative to productivity because

Accepted Answer

A) workers are not allowed to freely move across national boundaries to seek higher wages. 
B) some countries do a bad job of educating their work force,consequently they are not very productive. 
C) in some countries there is a shortage of capital investment. 
D) all of the options are equally important 
A) workers are not allowed to freely move across national boundaries to seek higher wages. 
B) some countries do a bad job of educating their work force,consequently they are not very productive. 
C) in some countries there is a shortage of capital investment. 
D) all of the options are equally important

Question 6

Such products as mineral ore and cement that are heavy or bulky relative to their economic values

Accepted Answer

A) may be suitable for exporting because high transportation costs will be overcome by high profit margins in oligopolistic industries. 
B) have high "value-to-weight ratios" that protect profit margins. 
C) may not be suitable for exporting because high transportation costs will substantially reduce profit margins. 
D) none of the options 
A) may be suitable for exporting because high transportation costs will be overcome by high profit margins in oligopolistic industries. 
B) have high "value-to-weight ratios" that protect profit margins. 
C) may not be suitable for exporting because high transportation costs will substantially reduce profit margins. 
D) none of the options

Question 7

Examples of transfer 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 options 
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 options

Question 8

During the six-year period 2010-2015,

Accepted Answer

A) China received the largest amount of FDI inflows. 
B) India received the largest amount of FDI inflows. 
C) Mexico received the largest amount of FDI inflows. 
D) the United States received the largest amount of FDI inflows. 
A) China received the largest amount of FDI inflows. 
B) India received the largest amount of FDI inflows. 
C) Mexico received the largest amount of FDI inflows. 
D) the United States received the largest amount of FDI inflows.

Question 9

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

Accepted Answer

A) integration of the host country into the world political/economic system. 
B) the host country's ethnic and religious stability. 
C) the host country's regional security,and key economic indicators. 
D) all of the options 
A) integration of the host country into the world political/economic system. 
B) the host country's ethnic and religious stability. 
C) the host country's regional security,and key economic indicators. 
D) all of the options

Question 10

Synergistic gains

Accepted Answer

A) are obtained when the acquiring firm is greater in value than the stand-alone valuations of the target firm(s). 
B) can only be obtained by increases in market power. 
C) are obtained when the value of the combined firm is greater than the stand-alone valuations of the individual (acquiring and target)firms. 
D) none of the options 
A) are obtained when the acquiring firm is greater in value than the stand-alone valuations of the target firm(s). 
B) can only be obtained by increases in market power. 
C) are obtained when the value of the combined firm is greater than the stand-alone valuations of the individual (acquiring and target)firms. 
D) none of the options

Question 11

During the six-year period 2010-2015,total annual worldwide FDI outflows amounted to

Accepted Answer

A) about $1,500 million on average. 
B) about $1,394 billion on average. 
C) about $1,000 trillion on average. 
D) none of the options 
A) about $1,500 million on average. 
B) about $1,394 billion on average. 
C) about $1,000 trillion on average. 
D) none of the options

Question 12

One particular type of political risk that MNCs and investors may face is corruption associated with the abuse of public office for private benefits.

Accepted Answer

A) Investors may often encounter demands for bribes from politicians and government officials for contracts and smooth bureaucratic processes. 
B) If companies refuse to make grease payments,they may lose business opportunities or face difficult bureaucratic red tape. 
C) They may risk violating laws or being embarrassed when the payments are discovered and reported in the media. 
D) all of the options 
A) Investors may often encounter demands for bribes from politicians and government officials for contracts and smooth bureaucratic processes. 
B) If companies refuse to make grease payments,they may lose business opportunities or face difficult bureaucratic red tape. 
C) They may risk violating laws or being embarrassed when the payments are discovered and reported in the media. 
D) all of the options

Question 13

When firms undertake FDI,

Accepted Answer

A) they become MNCs. 
B) they reduce their tax rate since they can tell each country that they do business in that they paid their taxes in other countries. 
C) they can exploit workers by paying them below-market wages in depreciating currencies. 
D) all of the options 
A) they become MNCs. 
B) they reduce their tax rate since they can tell each country that they do business in that they paid their taxes in other countries. 
C) they can exploit workers by paying them below-market wages in depreciating currencies. 
D) all of the options

Question 14

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 15

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 the options 
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 the options

Question 16

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 the options 
A) micro risk. 
B) macro risk. 
C) both micro and macro risk. 
D) none of the options

Question 17

Severe imperfections in the labor market lead to

Accepted Answer

A) persistent wage differentials among countries. 
B) persistent exchange rate volatility among countries. 
C) persistent interest rate differentials among countries. 
D) none of the options 
A) persistent wage differentials among countries. 
B) persistent exchange rate volatility among countries. 
C) persistent interest rate differentials among countries. 
D) none of the options

Question 18

North Korea,Iran,and Cuba are examples of

Accepted Answer

A) countries with low levels of political risk. 
B) countries with high levels of political risk. 
C) countries that are politically and economically isolated from the rest of the world. 
D) countries with high and low levels of political risk. 
A) countries with low levels of political risk. 
B) countries with high levels of political risk. 
C) countries that are politically and economically isolated from the rest of the world. 
D) countries with high and low levels of political risk.

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. 
A) also the United States. 
B) France. 
C) Germany. 
D) China.

Question 20

Many MNCs involved in extractive/natural resources industries

Accepted Answer

A) tend to directly own oil fields,mine deposits,and forests. 
B) tend to lease their oil fields,mine deposits,and forests. 
C) tend to partner with local firms,leveraging their intangible assets. 
D) none of the options 
A) tend to directly own oil fields,mine deposits,and forests. 
B) tend to lease their oil fields,mine deposits,and forests. 
C) tend to partner with local firms,leveraging their intangible assets. 
D) none of the options

Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

Cross-border acquisition involves

Following Honda's FDI in the U.S.,

The third most important source of FDI outflows is

In a push to serve the North American market Samsung,a Korean firm,chose to locate production facilities in Mexico,mainly because

Labor services in a country might be underpriced relative to productivity because

Such products as mineral ore and cement that are heavy or bulky relative to their economic values

Examples of transfer risk include

During the six-year period 2010-2015,

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

Synergistic gains

During the six-year period 2010-2015,total annual worldwide FDI outflows amounted to

One particular type of political risk that MNCs and investors may face is corruption associated with the abuse of public office for private benefits.

When firms undertake FDI,

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

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

The communist victory in China in 1949 is an example of

Severe imperfections in the labor market lead to

North Korea,Iran,and Cuba are examples of

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

Many MNCs involved in extractive/natural resources industries

International Monetary System

Globalization and the Multinational Firm

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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