Exam 18: International Financial Management

The hurdle rate refers to the number of years it will take the firm to recover the original cash investment from a project's earnings.

The simplest form of countertrade is barter, in which each party simultaneously swaps its products for the products of the other.

When does a firm face transaction exposure?

Karcher Enterprises, an MNE, is considering building a new factory overseas but has not determined the best location. Which of the following potential locations would require Karcher Enterprises to make the largest risk adjustment?

What are the major forms of payment for international transactions?

How do MNCs benefit from using tax havens?

Why does Eximbank offer a working capital guarantee loan program?

You are a financial officer at an MNC. What types of foreign exchange risks do you frequently face? What capital budgeting techniques do you use to manage these risks?

Intracorporate transfers of funds must be done on a fair-market basis.

Japan's Fukusuke Corporation sold 10 knitting machines and raw materials to Chinatex, a Shanghai-based clothing manufacturer in exchange for one million pairs of underwear to be produced on the knitting machines. What form of countertrade is this?

One way to minimize transaction exposure is to use an operational or natural hedge.

What role does the Export-Import Bank play in financing international trade?

FedEx provided Lewis Exporters with a document that serves as a contract for transporting twenty boxes from Boston to Paris. Which term best describes this document?

A firm faces translation exposure when the financial benefits and costs of an international transaction can be affected by exchange rate movements that occur after the firm is legally obligated to complete the transaction.

Long-term investments in property, plant, and equipment are especially vulnerable to economic exposure.

Which of the following strategies offers firms the potential for capital gain if the home currency rises in value?

Open account is the safest form of payment from the importer's perspective.

Janson Enterprises, a U.S. firm, is exporting medical equipment to an Indonesian firm that has poor credit. Which method of payment would Janson most likely prefer?

When paying via ________, the goods are shipped by the exporter and received by the importer before payment, and the exporter then bills the importer for the goods, stipulating the amount, form, and time at which payment is expected.

Which currency is used most often for transactions involving commercial aircraft?