Question 1
-
Even if production costs are higher in a
foreign country, a U.S. firm may establish a manufacturing plant in the foreign
country now if:Answer
the host government of that country
eliminates all quotas.the host government of that country
reduces all quotas.the host government of that country
increases all quotas.the host government of that country
eliminates all tariffs.
1 points
Question 2
-
To fully benefit from economies of scale, an
MNC should:Answer
establish a subsidiary in a new
market that can sell products produced elsewhere.establish a subsidiary in a market
that has relatively low costs of labor or land.establish a subsidiary in a market
where raw materials are cheap and accessible.participate in a joint venture in
order to learn about a production process or other
operations.
1 points
Question 3
-
To diversify internationally for the purpose
of reducing risk, which strategy is appropriate?Answer
Establish subsidiaries in markets
whose business cycles are the same as those where existing subsidiaries are
based.Establish a subsidiary in a market
that has relatively low cost of labor or land.Establish a subsidiary in a market
where the local currency is weak but is expected to appreciate over
time.Establish subsidiaries in markets
whose business cycles differ from those where existing subsidiaries are
based.
1 points
Question 4
-
If countries are highly influential upon each
other, the correlations of their economic growth levels would likely be ____. A
firm would benefit ____ by diversifying sales among these countries relative to
another set of countries that were not influential upon each
other.Answer
high and positive;
moreclose to zero;
morehigh and positive;
lessclose to zero;
less
1 points
Question 5
-
Assume a U.S. firm initiates direct foreign
investment in the U.K. If the British pound is expected to appreciate against
the dollar, the dollar value of earnings remitted to the parent should ____. The
parent may request that the subsidiary ____ in order to benefit from the
expectation about the pound.Answer
increase; postpone remitting
earnings until the pound strengthensdecrease; postpone remitting
earnings until the pound strengthensdecrease; remit earnings
immediately before the pound strengthensincrease; remit earnings
immediately before the pound
strengthens
1 points
Question 6
-
Constraints pertaining to taxes, currency
convertibility, earnings remittance, and employee rights are best described
as:Answer
ethical
differences.regulatory
barriers.quota
barriers.“Red Tape”
barriers.
1 points
Question 7
-
The ____ a project’s variability in cash
flows, and the ____ the positive correlation between the project’s cash flow and
the MNC’s cash flow, the lower the risk of the
project.Answer
higher;
higherhigher;
lowerlower;
lowerlower;
higher
1 points
Question 8
-
Assume that the government of Krusho requires
bribes to approve certain projects. MNCs that attempt to do business in Krusho
must deal with:Answer
protective
barriers.“red tape”
barriers.ethical
differences.regulatory
barriers.
1 points
Question 9
-
Procedural and documentation requirements
imposed by the foreign government are referred to as:Answer
regulatory
barriers.industry
barriers.protective
barriers.“Red Tape”
barriers.
1 points
Question 10
-
Based on the text, it should be obvious that
markets are ____ in reality, and consequently, monopolistic advantages ____ be
exploited.Answer
perfect; may
possiblyperfect;
cannotimperfect; may
possiblyimperfect;
cannot
1 points
Question 11
-
____ is not a cost-related motive for direct
foreign investment.Answer
Exploiting monopolistic
advantagesFully benefiting from economies of
scaleUsing foreign factors of
productionUsing foreign raw
materials
1 points
Question 12
-
____ is not a revenue-related motive for
direct foreign investment.Answer
Attracting new sources of
demandFully benefiting from economies of
scaleExploiting monopolistic
advantagesEntering profitable
markets
1 points
Question 13
-
Which of the following is not a cost-related
motive of direct foreign investment?Answer
International
diversification.Low labor
costs.Land can be purchased at a low
price.Manufacturing plants can be built
for a low price.
1 points
Question 14
-
Which of the following is not true regarding
host government attitudes towards direct foreign investment
(DFI)?Answer
Host governments may offer
incentives to MNCs in the form of subsidies in certain
circumstances.Host governments generally perceive
DFI as a remedy to eliminate a country’s political
problems.The ability of a host government to
attract DFI is dependent on the country’s markets and
resources.Some types of DFI will be more
attractive to some governments than to
others.
1 points
Question 15
-
To use foreign factors of production, an MNC
should:Answer
establish a subsidiary in a new
market that can sell products produced elsewhere.establish a subsidiary in a market
that has relatively low costs of labor or land.establish a subsidiary in a market
where raw materials are cheap and accessible.participate in a joint venture in
order to learn about a production process or other
operations.
1 points
Question 16
-
Like income tax treaties, ____ help to avoid
double taxation and stimulate direct foreign
investment.Answer
withholding
taxesexcise
taxestax credits
carryforwards
1 points
Question 17
-
When assessing a German project administered
by a German subsidiary of a U.S.-based MNC solely from the German subsidiary’s
perspective, which variable will most likely influence the capital budgeting
analysis?Answer
the withholding tax
rate.the euro’s exchange
rate.the U.S. tax rate on earnings
remitted to the U.S.the German government’s tax
rate.
1 points
Question 18
-
____ is not a method of incorporating an
adjustment for risk into the capital budgeting
analysis.Answer
Discriminant
analysisRisk-adjusted discount
rateSensitivity
analysisSimulation
1 points
Question 19
-
The required rate of return of a project is
____ the MNC’s cost of capital.Answer
greater
thanless than
the same as
any of the above, depending on the
specific project
1 points
Question 20
-
In capital budgeting analysis, the use of a
cumulative NPV is useful for:Answer
determining a probability
distribution of NPVs.determining the time required to
achieve a positive NPV.determining how the required rate
of return changes over time.determining how the cost of capital
changes over time.
1 points
Question 21
-
When conducting a capital budgeting analysis
and attempting to account for effects of exchange rate movements for a foreign
project, inflation ____ included explicitly in the cash flow analysis, and debt
payments by the subsidiary ____ included explicitly in the cash flow
analysis.Answer
should be; should
beshould definitely not be; should
definitely not beshould definitely not be; should
beshould be; should definitely not
be
1 points
Question 22
-
A foreign project generates a negative cash
flow in year 1 and positive cash flows in years 2 through 5. The NPV for this
project will be higher if the foreign currency ____ in year 1 and ____ in years
2 through 5.Answer
depreciates;
depreciatesappreciates;
appreciatesdepreciates;
appreciatesappreciates;
depreciates
1 points
Question 23
-
A firm considers an exporting project and
will invoice the exports in dollars. The expected cash flows in dollars would be
more difficult if the currency of the foreign country is
____.Answer
fixed
volatile
stable
none of the above, as the firm is
not exposed
1 points
Question 24
-
One foreign project in Hungary and another in
Japan had the same perceived value from the U.S. parent’s perspective. Then, the
exchange rate expectations were revised, upward for the value of the Hungarian
forint and downward for the Japanese yen. The break-even salvage value for the
project in Japan would now be ____ from the parent’s
perspective.Answer
negative
higher than that for the Hungarian
projectlower than that for the Hungarian
projectthe same as that for the Hungarian
project
1 points
Question 25
-
A U.S.-based MNC has just established a
subsidiary in Algeria. Shortly after the plant was built, the MNC determines
that its exchange rate forecasts, which had previously indicated a slight
appreciation in the Algerian dinar, were probably false. Instead of a slight
appreciation, the MNC now expects that the dinar will depreciate substantially
due to political turmoil in Algeria. This new development would likely cause the
MNC to ____ its estimate of the previously computed net present
value.Answer
lower
increase
lower, but not necessarily if the
MNC invests enough in Algeria to offset the decrease in
NPVincrease, but not necessarily if
the MNC reduces its investment in Algeria by an offsetting
amount
1 points
Question 26
-
Assume an MNC establishes a subsidiary where
it has no other existing business. The present value of parent cash flows from
this subsidiary is more sensitive to exchange rate movements
when:Answer
the subsidiary finances the entire
investment by local borrowing.the subsidiary finances most of
the investment by local borrowing.the parent finances most of the
investment.the parent finances the entire
investment.
1 points
Question 27
-
The break-even salvage value of a particular
project is the salvage value necessary to:Answer
offset any losses incurred by the
subsidiary in a given year.offset any losses incurred by the
MNC overall in a given year.make the project have zero
profits.make the project’s return equal
the required rate of return.
1 points
Question 28
-
An international project’s NPV is ____
related to the size of the initial investment and ____ related to the project’s
required rate of return.Answer
positively;
positivelypositively;
negativelynegatively;
positivelynegatively;
negatively
1 points
Question 29
-
An international project’s NPV is ____
related to consumer demand and ____ related to the project’s salvage
value.Answer
positively;
positivelypositively;
negativelynegatively;
positivelynegatively;
negatively
1 points
Question 30
-
According to the text, in order to develop a
distribution of possible net present values from international projects, a firm
should use:Answer
a risk-adjusted discount
rate.a payback
period.certainty
equivalents.simulation.
