Question 1

​An industry based on which of the following 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 programs
D)   ​development of more sophisticated computer technology A

Question 2

The valuation of an MNC is reduced if the required rate of return on its investments in foreign countries is reduced.

Accepted Answer

A) True 
 B)False  False

Question 3

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

Accepted Answer

A)   Government may impose taxes on a subsidiary.
B)   Government may impose barriers on a subsidiary.
C)   Consumers may boycott the MNC.
D)   Consumers' income levels may decrease, thus decreasing consumption. D

Question 4

A macroeconomic perspective focuses on the financial management decisions that affect the value of an MNC.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not normally want to take control of it and therefore have no influence over management of the MNC.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an example of direct foreign investment for a U.S.-based MNC?

Accepted Answer

A)   exporting to a country
B)   licensing arrangements that will allow a foreign country to use the MNC's technology
C)   purchasing existing companies in a country
D)   investing directly (without brokers)  in foreign stocks

Question 8

In determining the valuation of foreign projects, an MNC will always use the same required rate of return as it would for its domestic projects.

Accepted Answer

A) True 
 B)False

Question 9

U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs.

Accepted Answer

A) True 
 B)False

Question 10

When the parent's home currency is weak, remitted funds from foreign subsidiaries will convert to a smaller amount of the home currency.

Accepted Answer

A) True 
 B)False

Question 11

The theory of comparative advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following does not possibly represent 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

Question 13

The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.

Accepted Answer

A) True 
 B)False

Question 14

​With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

Accepted Answer

A)   ​shareholder wealth; short-term earnings
B)   ​shareholder wealth; shareholder wealth
C)   ​short-term earnings; sales volume
D)   ​short-term earnings; shareholder wealth

Question 15

If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they automatically maximize the value of the entire corporation.

Accepted Answer

A) True 
 B)False

Question 16

For an MNC, agency costs are typically:

Accepted Answer

A)   nonexistent.
B)   larger than agency costs of a small purely domestic firm.
C)   smaller than agency costs of a small purely domestic firm.
D)   the same as agency costs of a small purely domestic firm.

Question 17

Which of the following is not mentioned in the text as an additional risk resulting from international business?

Accepted Answer

A)   exchange rate fluctuations
B)   political risk
C)   interest rate risk
D)   exposure to foreign economies

Question 18

Assume that an American firm wants to engage in international business without making a major investment in the foreign country. Which method is least appropriate in this situation?​

Accepted Answer

A)   ​international trade
B)   ​licensing
C)   ​franchising
D)   ​direct foreign investment

Question 19

A decentralized management style results in relatively high agency costs for an MNC.

Accepted Answer

A) True 
 B)False

Question 20

A centralized management style for an MNC results in relatively high agency costs.

Accepted Answer

A) True 
 B)False

Exam 1: Multinational Financial Management: an Overview

An industry based on which of the following would most likely take advantage of lower costs in some less developed foreign countries?

The valuation of an MNC is reduced if the required rate of return on its investments in foreign countries is reduced.

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

A macroeconomic perspective focuses on the financial management decisions that affect the value of an MNC.

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

Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not normally want to take control of it and therefore have no influence over management of the MNC.

Which of the following is an example of direct foreign investment for a U.S.-based MNC?

In determining the valuation of foreign projects, an MNC will always use the same required rate of return as it would for its domestic projects.

U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs.

When the parent's home currency is weak, remitted funds from foreign subsidiaries will convert to a smaller amount of the home currency.

The theory of comparative advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.

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

The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.

With regard to corporate goals, an MNC is mostly concerned with maximizing , and a purely domestic firm is mostly concerned with maximizing .

If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they automatically maximize the value of the entire corporation.

For an MNC, agency costs are typically:

Which of the following is not mentioned in the text as an additional risk resulting from international business?

Assume that an American firm wants to engage in international business without making a major investment in the foreign country. Which method is least appropriate in this situation?

A decentralized management style results in relatively high agency costs for an MNC.

A centralized management style for an MNC results in relatively high agency costs.

Exam 1: Multinational Financial Management: an Overview

​An industry based on which of the following would most likely take advantage of lower costs in some less developed foreign countries?

The valuation of an MNC is reduced if the required rate of return on its investments in foreign countries is reduced.

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

A macroeconomic perspective focuses on the financial management decisions that affect the value of an MNC.

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

Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not normally want to take control of it and therefore have no influence over management of the MNC.

Which of the following is an example of direct foreign investment for a U.S.-based MNC?

In determining the valuation of foreign projects, an MNC will always use the same required rate of return as it would for its domestic projects.

U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs.

When the parent's home currency is weak, remitted funds from foreign subsidiaries will convert to a smaller amount of the home currency.

The theory of comparative advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.

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

The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.

​With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they automatically maximize the value of the entire corporation.

For an MNC, agency costs are typically:

Which of the following is not mentioned in the text as an additional risk resulting from international business?

Assume that an American firm wants to engage in international business without making a major investment in the foreign country. Which method is least appropriate in this situation?​

A decentralized management style results in relatively high agency costs for an MNC.

A centralized management style for an MNC results in relatively high agency costs.

An industry based on which of the following would most likely take advantage of lower costs in some less developed foreign countries?

With regard to corporate goals, an MNC is mostly concerned with maximizing , and a purely domestic firm is mostly concerned with maximizing .

Assume that an American firm wants to engage in international business without making a major investment in the foreign country. Which method is least appropriate in this situation?