Question 1

When economic conditions of two countries are ____, an MNC would ____ its risk by operating in both countries instead of concentrating just in one.

Accepted Answer

A)  highly correlated; reduce 
B)  not highly correlated; not reduce 
C)  not highly correlated; reduce 
D)  None of these are correct. 
A)  highly correlated; reduce 
B)  not highly correlated; not reduce 
C)  not highly correlated; reduce 
D)  None of these are correct. C

Question 2

An MNC will likely benefit most from diversifying if:

Accepted Answer

A)  the correlations between country economies are high. 
B)  the correlations between country economies are low. 
C)  the variability of all country economy levels is high. 
D)  the correlations between country economies are low AND the variability of all country economy levels is high. 
A)  the correlations between country economies are high. 
B)  the correlations between country economies are low. 
C)  the variability of all country economy levels is high. 
D)  the correlations between country economies are low AND the variability of all country economy levels is high. B

Question 3

If countries' economies are highly integrated, 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 whose economies are less integrated.

Accepted Answer

A)  high and positive; more 
B)  close to zero; more 
C)  high and positive; less 
D)  close to zero; less 
A)  high and positive; more 
B)  close to zero; more 
C)  high and positive; less 
D)  close to zero; less C

Question 4

Direct foreign investment is perceived by foreign governments to:

Accepted Answer

A)  be a cause of national problems. 
B)  be a remedy for national problems. 
C)  either be a cause of national problems OR be a remedy for national problems is possible. 
D)  have no impact on national problems. 
A)  be a cause of national problems. 
B)  be a remedy for national problems. 
C)  either be a cause of national problems OR be a remedy for national problems is possible. 
D)  have no impact on national problems.

Question 5

Some governments restrict foreign ownership of local firms. Such restrictions may limit or prevent international acquisitions.

Accepted Answer

A) True 
 B)False

Question 6

MNCs can probably achieve more desirable risk-return characteristics from their project portfolios if they sufficiently diversify among products and geographical markets.

Accepted Answer

A) True 
 B)False

Question 7

According to the text, a host government would be least likely to provide incentives for direct foreign investment (DFI) into its country if the firm planning DFI:

Accepted Answer

A)  would compete with local firms of the host country. 
B)  would produce a good not currently available in the host country. 
C)  would produce a good and export it to other countries. 
D)  would produce a good not currently available in the host country AND would produce a good and export it to other countries. 
A)  would compete with local firms of the host country. 
B)  would produce a good not currently available in the host country. 
C)  would produce a good and export it to other countries. 
D)  would produce a good not currently available in the host country AND would produce a good and export it to other countries.

Question 8

According to the text, a firm may be able to achieve a "more efficient" project portfolio if it:

Accepted Answer

A)  focuses solely on one product. 
B)  focuses solely on one location to market what it produces. 
C)  focuses solely on one product AND focuses solely on one location to market what it produces. 
D)  None of these are correct. 
A)  focuses solely on one product. 
B)  focuses solely on one location to market what it produces. 
C)  focuses solely on one product AND focuses solely on one location to market what it produces. 
D)  None of these are correct.

Question 9

Which of the following is not a cost-related motive of direct foreign investment?

Accepted Answer

A)  international diversification 
B)  low labor costs 
C)  low price of purchasing land 
D)  weak value of the foreign currency needed 
A)  international diversification 
B)  low labor costs 
C)  low price of purchasing land 
D)  weak value of the foreign currency needed

Question 10

​Assume a U.S. MNC initiates direct foreign investment in the United Kingdom. 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.

Accepted Answer

A)  ​increase; postpone remitting earnings until the pound strengthens 
B)  ​decrease; postpone remitting earnings until the pound strengthens 
C)  ​decrease; remit earnings immediately before the pound strengthens 
D)  ​increase; remit earnings immediately before the pound strengthens 
A)  ​increase; postpone remitting earnings until the pound strengthens 
B)  ​decrease; postpone remitting earnings until the pound strengthens 
C)  ​decrease; remit earnings immediately before the pound strengthens 
D)  ​increase; remit earnings immediately before the pound strengthens

Question 11

Which of the following purchases does not represent direct foreign investment?

Accepted Answer

A)  machinery to be used in manufacturing 
B)  a tract of land 
C)  bonds and other financial assets 
D)  a manufacturing plant 
A)  machinery to be used in manufacturing 
B)  a tract of land 
C)  bonds and other financial assets 
D)  a manufacturing plant

Question 12

To fully benefit from economies of scale, an MNC should:

Accepted Answer

A)  establish a subsidiary in a new market that can sell products produced elsewhere, which allows for increased production and thus possibly greater efficiency. 
B)  establish a subsidiary in a market that has relatively low costs of labor or land. 
C)  establish a subsidiary in a market where raw materials are cheap and accessible. 
D)  participate in a joint venture in order to learn about a production process or other operations. 
A)  establish a subsidiary in a new market that can sell products produced elsewhere, which allows for increased production and thus possibly greater efficiency. 
B)  establish a subsidiary in a market that has relatively low costs of labor or land. 
C)  establish a subsidiary in a market where raw materials are cheap and accessible. 
D)  participate in a joint venture in order to learn about a production process or other operations.

Question 13

A country with high unemployment could best increase its employment by:

Accepted Answer

A)  encouraging foreign firms to establish subsidiaries that produce the same products local firms produce. 
B)  encouraging foreign firms to establish licensing arrangements for products local firms produce. 
C)  encouraging foreign firms to establish subsidiaries that produce products that are not produced locally and to export the products. 
D)  None of these would reduce employment. 
A)  encouraging foreign firms to establish subsidiaries that produce the same products local firms produce. 
B)  encouraging foreign firms to establish licensing arrangements for products local firms produce. 
C)  encouraging foreign firms to establish subsidiaries that produce products that are not produced locally and to export the products. 
D)  None of these would reduce employment.

Question 14

The most important cost-related motive for direct foreign investment is diversification across product markets.

Accepted Answer

A) True 
 B)False

Question 15

​According to your text, ____ is a country that has been perceived as one of the most attractive sources of new demand.

Accepted Answer

A)  ​Paraguay 
B)  ​Morocco 
C)  ​Sweden 
D)  ​China 
A)  ​Paraguay 
B)  ​Morocco 
C)  ​Sweden 
D)  ​China

Question 16

When an MNC analyzes the feasibility of a project, it should consider the:

Accepted Answer

A)  variability of the project's cash flow. 
B)  correlation of the project's cash flow relative to the prevailing cash flows of the MNC. 
C)  variability of the project's cash flow AND correlation of the project's cash flow relative to the prevailing cash flows of the MNC. 
D)  None of these are correct. 
A)  variability of the project's cash flow. 
B)  correlation of the project's cash flow relative to the prevailing cash flows of the MNC. 
C)  variability of the project's cash flow AND correlation of the project's cash flow relative to the prevailing cash flows of the MNC. 
D)  None of these are correct.

Question 17

A way of accomplishing the revenue-related motive of diversifying internationally is to:

Accepted Answer

A)  acquire a competitor that has controlled its local market. 
B)  establish a subsidiary or acquire a competitor in a new market. 
C)  establish a subsidiary in a market where tougher trade restrictions will adversely affect the firm's export volume. 
D)  establish subsidiaries in markets whose business cycles differ from those where existing subsidiaries are based. 
A)  acquire a competitor that has controlled its local market. 
B)  establish a subsidiary or acquire a competitor in a new market. 
C)  establish a subsidiary in a market where tougher trade restrictions will adversely affect the firm's export volume. 
D)  establish subsidiaries in markets whose business cycles differ from those where existing subsidiaries are based.

Question 18

Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true?

Accepted Answer

A)  Japanese exporters can increase U.S. sales by shifting operations from their British subsidiaries to Japan. 
B)  British exporters can increase U.S. sales by shifting operations from their Japanese subsidiaries to Britain. 
C)  U.S. exporters can increase sales to Japan by shifting operations from Japanese subsidiaries to U.S. subsidiaries. 
D)  British exporters can increase U.S. sales by shifting operations from their Japanese subsidiaries to Britain AND U.S exporters can increase sales to Japan by shifting operations from Japanese subsidiaries to U.S. subsidiaries. 
A)  Japanese exporters can increase U.S. sales by shifting operations from their British subsidiaries to Japan. 
B)  British exporters can increase U.S. sales by shifting operations from their Japanese subsidiaries to Britain. 
C)  U.S. exporters can increase sales to Japan by shifting operations from Japanese subsidiaries to U.S. subsidiaries. 
D)  British exporters can increase U.S. sales by shifting operations from their Japanese subsidiaries to Britain AND U.S exporters can increase sales to Japan by shifting operations from Japanese subsidiaries to U.S. subsidiaries.

Question 19

MNCs commonly consider direct foreign investment because it can improve their profitability and enhance shareholder wealth.

Accepted Answer

A) True 
 B)False

Question 20

In assessing the risk of an individual project, the expected correlation of the new project's returns with those of the prevailing business should be considered.

Accepted Answer

A) True 
 B)False

When economic conditions of two countries are , an MNC would its risk by operating in both countries instead of concentrating just in one.

An MNC will likely benefit most from diversifying if:

If countries' economies are highly integrated, 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 whose economies are less integrated.

Direct foreign investment is perceived by foreign governments to:

Some governments restrict foreign ownership of local firms. Such restrictions may limit or prevent international acquisitions.

MNCs can probably achieve more desirable risk-return characteristics from their project portfolios if they sufficiently diversify among products and geographical markets.

According to the text, a host government would be least likely to provide incentives for direct foreign investment (DFI) into its country if the firm planning DFI:

According to the text, a firm may be able to achieve a "more efficient" project portfolio if it:

Which of the following is not a cost-related motive of direct foreign investment?

Which of the following purchases does not represent direct foreign investment?

To fully benefit from economies of scale, an MNC should:

A country with high unemployment could best increase its employment by:

The most important cost-related motive for direct foreign investment is diversification across product markets.

According to your text, ____ is a country that has been perceived as one of the most attractive sources of new demand.

When an MNC analyzes the feasibility of a project, it should consider the:

A way of accomplishing the revenue-related motive of diversifying internationally is to:

Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true?

MNCs commonly consider direct foreign investment because it can improve their profitability and enhance shareholder wealth.

In assessing the risk of an individual project, the expected correlation of the new project's returns with those of the prevailing business should be considered.

Multinational Financial Management: an Overview

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

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 13: Direct Foreign Investment

When economic conditions of two countries are ____, an MNC would ____ its risk by operating in both countries instead of concentrating just in one.

An MNC will likely benefit most from diversifying if:

If countries' economies are highly integrated, 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 whose economies are less integrated.

Direct foreign investment is perceived by foreign governments to:

Some governments restrict foreign ownership of local firms. Such restrictions may limit or prevent international acquisitions.

MNCs can probably achieve more desirable risk-return characteristics from their project portfolios if they sufficiently diversify among products and geographical markets.

According to the text, a host government would be least likely to provide incentives for direct foreign investment (DFI) into its country if the firm planning DFI:

According to the text, a firm may be able to achieve a "more efficient" project portfolio if it:

Which of the following is not a cost-related motive of direct foreign investment?

Which of the following purchases does not represent direct foreign investment?

To fully benefit from economies of scale, an MNC should:

A country with high unemployment could best increase its employment by:

The most important cost-related motive for direct foreign investment is diversification across product markets.

​According to your text, ____ is a country that has been perceived as one of the most attractive sources of new demand.

When an MNC analyzes the feasibility of a project, it should consider the:

A way of accomplishing the revenue-related motive of diversifying internationally is to:

Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true?

MNCs commonly consider direct foreign investment because it can improve their profitability and enhance shareholder wealth.

In assessing the risk of an individual project, the expected correlation of the new project's returns with those of the prevailing business should be considered.

Multinational Financial Management: an Overview

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

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

When economic conditions of two countries are , an MNC would its risk by operating in both countries instead of concentrating just in one.

If countries' economies are highly integrated, 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 whose economies are less integrated.

According to your text, ____ is a country that has been perceived as one of the most attractive sources of new demand.