Exam 1: Multinational Financial Management: an Overview

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 the won is $.0012. What are the expected dollar cash flows of Livingston Co.?

(Multiple Choice)

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Question 41

Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Saller Co. has declined since last month. What could have caused this decline in value?

(Multiple Choice)

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Question 42

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

(True/False)

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Question 43

Jensen Co. wants to establish a new subsidiary in Mexico that will sell computers to Mexican customers and remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso while Jensen establishes the new subsidiary and when the subsidiary starts operations.

(Multiple Choice)

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Question 44

An MNC's value depends on all of the following, except:

(Multiple Choice)

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Question 45

One form of exposure to political risk is terrorism.

(True/False)

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Question 46

Imperfect markets reflect conditions under which factors of production are immobile.

(True/False)

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Question 47

A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's operations.

(True/False)

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Question 48

Assume that Boca Co. wants to expand its business to Japan and wants complete control over the operations in Japan. Which method of international business is most appropriate for Boca Co?

(Multiple Choice)

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Question 49

MNCs commonly consider acquiring an existing foreign operation because the cost is less expensive than establishing a new subsidiary of the same size.

(True/False)

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Question 50

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

(True/False)

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Question 51

The least risky method by which firms conduct international business is:

(Multiple Choice)

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Question 52

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

(Multiple Choice)

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Question 53

Assume that an MNC has a subsidiary in Italy, which exports its products to various countries in Europe. Since all of the countries where it exports use the euro as their currency, this MNC is not subject to exchange rate risk.

(True/False)

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Question 54

Agency costs faced by MNCs may be larger than those faced by purely domestic firms because:

(Multiple Choice)

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Question 55

If markets were perfect, then labor and other costs of production would be perfectly stable (no movement across borders).

(True/False)

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Question 56

MNCs can improve their internal control process by all of the following, except:

(Multiple Choice)

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Question 57

Which of the following is not mentioned in the text as a theory of international business?

(Multiple Choice)

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Question 58

The goal of an MNC is to:

(Multiple Choice)

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Question 59

If markets were perfect, then labor and other costs of production would be easily transferable.

(True/False)

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Question 60

Showing 41 - 60 of 79

Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Saller Co. has declined since last month. What could have caused this decline in value?

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

An MNC's value depends on all of the following, except:

One form of exposure to political risk is terrorism.

Imperfect markets reflect conditions under which factors of production are immobile.

A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's operations.

Assume that Boca Co. wants to expand its business to Japan and wants complete control over the operations in Japan. Which method of international business is most appropriate for Boca Co?

MNCs commonly consider acquiring an existing foreign operation because the cost is less expensive than establishing a new subsidiary of the same size.

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

The least risky method by which firms conduct international business is:

Assume that an MNC has a subsidiary in Italy, which exports its products to various countries in Europe. Since all of the countries where it exports use the euro as their currency, this MNC is not subject to exchange rate risk.

Agency costs faced by MNCs may be larger than those faced by purely domestic firms because:

If markets were perfect, then labor and other costs of production would be perfectly stable (no movement across borders).

MNCs can improve their internal control process by all of the following, except:

Which of the following is not mentioned in the text as a theory of international business?

The goal of an MNC is to:

If markets were perfect, then labor and other costs of production would be easily transferable.

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 Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 1: Multinational Financial Management: an Overview

Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Saller Co. has declined since last month. What could have caused this decline in value?

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

An MNC's value depends on all of the following, except:

One form of exposure to political risk is terrorism.

Imperfect markets reflect conditions under which factors of production are immobile.

A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's operations.

Assume that Boca Co. wants to expand its business to Japan and wants complete control over the operations in Japan. Which method of international business is most appropriate for Boca Co?​

MNCs commonly consider acquiring an existing foreign operation because the cost is less expensive than establishing a new subsidiary of the same size.

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

The least risky method by which firms conduct international business is:

Assume that an MNC has a subsidiary in Italy, which exports its products to various countries in Europe. Since all of the countries where it exports use the euro as their currency, this MNC is not subject to exchange rate risk.

Agency costs faced by MNCs may be larger than those faced by purely domestic firms because:

If markets were perfect, then labor and other costs of production would be perfectly stable (no movement across borders).

MNCs can improve their internal control process by all of the following, except:

Which of the following is not mentioned in the text as a theory of international business?

The goal of an MNC is to:​

If markets were perfect, then labor and other costs of production would be easily transferable.

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 Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Assume that Boca Co. wants to expand its business to Japan and wants complete control over the operations in Japan. Which method of international business is most appropriate for Boca Co?

The goal of an MNC is to: