Question 1

Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries?

Accepted Answer

A)  assembly line production. 
B)  specialized professional services. 
C)  nuclear missile planning. 
D)  planning for more sophisticated computer technology. 
A)  assembly line production. 
B)  specialized professional services. 
C)  nuclear missile planning. 
D)  planning for more sophisticated computer technology. A

Question 2

The acquisition of a foreign subsidiary is commonly considered by MNCs because the cost is less expensive than establishing a new subsidiary of the same size.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following could reduce agency problems for an MNC?

Accepted Answer

A)  stock options as managerial compensation. 
B)  hostile takeover threat. 
C)  investor monitoring. 
D)  all of the above are forms of corporate control that could reduce agency problems for an MNC. 
A)  stock options as managerial compensation. 
B)  hostile takeover threat. 
C)  investor monitoring. 
D)  all of the above are forms of corporate control that could reduce agency problems for an MNC. D

Question 4

The establishment of a new subsidiary is commonly considered by MNCs because the cost is less expensive than acquiring a foreign subsidiary of the same size.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a way in which agency problems can be reduced through corporate control?

Accepted Answer

A)  executive compensation. 
B)  threat of hostile takeover. 
C)  acquisition of a foreign subsidiary. 
D)  monitoring by large shareholders. 
A)  executive compensation. 
B)  threat of hostile takeover. 
C)  acquisition of a foreign subsidiary. 
D)  monitoring by large shareholders.

Question 6

A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.

Accepted Answer

A) True 
 B)False

Question 7

Assume that Live Co. has expected cash flows of $200,000 from domestic operations, SF200,000 from Swiss operations, and 150,000 euros from Italian operations at the end of the year. The Swiss franc's value and euro's value are expected to be $.83 and $1.29 respectively, at the end this year. What are the expected dollar cash flows of Live Co?

Accepted Answer

A)  $200,000 
B)  $559,500 
C)  $582,500 
D)  $393,500 
A)  $200,000 
B)  $559,500 
C)  $582,500 
D)  $393,500

Question 8

A microeconomic perspective focuses on external forces such as economic conditions that can affect the value of an MNC.

Accepted Answer

A) True 
 B)False

Question 9

Due to the risks involved in international business, firms should:

Accepted Answer

A)  only consider international business in major countries. 
B)  maintain international business to no more than 20% of total business. 
C)  maintain international business to no more than 35% of total business. 
D)  none of the above 
A)  only consider international business in major countries. 
B)  maintain international business to no more than 20% of total business. 
C)  maintain international business to no more than 35% of total business. 
D)  none of the above

Question 10

Livingston Co. has a subsidiary in Korea. The subsidiary reinvests half of its net cash flows into operations and remits half to the parent. Livingston's expected cash flows from domestic business are $100,000 and the Korean subsidiary is expected to generate 100 million Korean won at the end of the year. The expected value of won is $.0012. What are the expected dollar cash flows of Livingston Co.?

Accepted Answer

A)  $100,000 
B)  $200,000 
C)  $160,000 
D)  $60,000 
A)  $100,000 
B)  $200,000 
C)  $160,000 
D)  $60,000

Question 11

The valuation of MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows remitted by the subsidiaries.

Accepted Answer

A) True 
 B)False

Question 12

The imperfect markets theory states that factors of production are somewhat immobile, allowing firms to capitalize on a foreign country's resources.

Accepted Answer

A) True 
 B)False

Question 13

An MNC may be more exposed to agency problems if most of its shares are held by:

Accepted Answer

A)  a few mutual funds 
B)  a widely dispersed set of individual investors 
C)  a few pension funds 
D)  all of the above would prevent agency problems 
A)  a few mutual funds 
B)  a widely dispersed set of individual investors 
C)  a few pension funds 
D)  all of the above would prevent agency problems

Question 14

The parent of MNC can implement compensation plans that directly reward the subsidiary managers for enhancing the value of the MNC.

Accepted Answer

A) True 
 B)False

Question 15

Franchising is the process by which national governments sell state owned operations to corporations and other investors.

Accepted Answer

A) True 
 B)False

Question 16

Under the Imperfect Markets Theory, it is assumed that factors of production are entirely mobile, so that firms can capitalize on a foreign country's resources.

Accepted Answer

A) True 
 B)False

Question 17

____ are most commonly classified as a direct foreign investment.

Accepted Answer

A)  Foreign acquisitions 
B)  Purchases of international stocks 
C)  Licensing agreements 
D)  Exporting transactions 
A)  Foreign acquisitions 
B)  Purchases of international stocks 
C)  Licensing agreements 
D)  Exporting transactions

Question 18

If a U.S.-based MNC focused completely on importing, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time.

Accepted Answer

A) True 
 B)False

Question 19

In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur ____ fixed production costs and ____ transportation costs than DFI.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; lower 
D)  lower; higher 
A)  higher; higher 
B)  higher; lower 
C)  lower; lower 
D)  lower; higher

Question 20

Which of the following does not constitute a form of direct foreign investment?

Accepted Answer

A)  Franchising 
B)  International trade 
C)  Joint ventures 
D)  Acquisitions of existing operations 
E)  Establishment of new foreign subsidiaries 
A)  Franchising 
B)  International trade 
C)  Joint ventures 
D)  Acquisitions of existing operations 
E)  Establishment of new foreign subsidiaries

Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries?

The acquisition of a foreign subsidiary is commonly considered by MNCs because the cost is less expensive than establishing a new subsidiary of the same size.

Which of the following could reduce agency problems for an MNC?

The establishment of a new subsidiary is commonly considered by MNCs because the cost is less expensive than acquiring a foreign subsidiary of the same size.

Which of the following is not a way in which agency problems can be reduced through corporate control?

A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.

A microeconomic perspective focuses on external forces such as economic conditions that can affect the value of an MNC.

Due to the risks involved in international business, firms should:

The valuation of MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows remitted by the subsidiaries.

The imperfect markets theory states that factors of production are somewhat immobile, allowing firms to capitalize on a foreign country's resources.

An MNC may be more exposed to agency problems if most of its shares are held by:

The parent of MNC can implement compensation plans that directly reward the subsidiary managers for enhancing the value of the MNC.

Franchising is the process by which national governments sell state owned operations to corporations and other investors.

Under the Imperfect Markets Theory, it is assumed that factors of production are entirely mobile, so that firms can capitalize on a foreign country's resources.

____ are most commonly classified as a direct foreign investment.

If a U.S.-based MNC focused completely on importing, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time.

In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur fixed production costs and transportation costs than DFI.

Which of the following does not constitute a form of direct foreign investment?

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 1: Multinational Financial Management: An Overview

Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries?

The acquisition of a foreign subsidiary is commonly considered by MNCs because the cost is less expensive than establishing a new subsidiary of the same size.

Which of the following could reduce agency problems for an MNC?

The establishment of a new subsidiary is commonly considered by MNCs because the cost is less expensive than acquiring a foreign subsidiary of the same size.

Which of the following is not a way in which agency problems can be reduced through corporate control?

A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.

A microeconomic perspective focuses on external forces such as economic conditions that can affect the value of an MNC.

Due to the risks involved in international business, firms should:

The valuation of MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows remitted by the subsidiaries.

The imperfect markets theory states that factors of production are somewhat immobile, allowing firms to capitalize on a foreign country's resources.

An MNC may be more exposed to agency problems if most of its shares are held by:

The parent of MNC can implement compensation plans that directly reward the subsidiary managers for enhancing the value of the MNC.

Franchising is the process by which national governments sell state owned operations to corporations and other investors.

Under the Imperfect Markets Theory, it is assumed that factors of production are entirely mobile, so that firms can capitalize on a foreign country's resources.

____ are most commonly classified as a direct foreign investment.

If a U.S.-based MNC focused completely on importing, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time.

In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur ____ fixed production costs and ____ transportation costs than DFI.

Which of the following does not constitute a form of direct foreign investment?

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur fixed production costs and transportation costs than DFI.