Question 1

A firm 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)  B and C 
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)  B and C B

Question 2

Direct foreign investment would typically be welcomed if:

Accepted Answer

A)  the products to be produced are substitutes for other locally produced products. 
B)  people from its headquarters country are transferred to the foreign country to work at the subsidiary. 
C)  the products to be produced are going to be exported. 
D)  all of the above 
A)  the products to be produced are substitutes for other locally produced products. 
B)  people from its headquarters country are transferred to the foreign country to work at the subsidiary. 
C)  the products to be produced are going to be exported. 
D)  all of the above C

Question 3

From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:

Accepted Answer

A)  is the top point. 
B)  is the point closest to the vertical axis. 
C)  is the point half way between the two end points. 
D)  cannot be determined since firms vary in their willing ness to accept risk. 
A)  is the top point. 
B)  is the point closest to the vertical axis. 
C)  is the point half way between the two end points. 
D)  cannot be determined since firms vary in their willing ness to accept risk. D

Question 4

Consider Firm "A" and Firm "B" that both produce the same product.  Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were __________ and the number of foreign countries it sold products to was __________.

Accepted Answer

A)  higher;large. 
B)  higher;small 
C)  lower;small 
D)  higher;large 
A)  higher;large. 
B)  higher;small 
C)  lower;small 
D)  higher;large

Question 5

Which of the following is not an advantage resulting from the Asian crisis that would favor direct foreign investment in Asia

Accepted Answer

A)  strong local demand for products. 
B)  low production costs. 
C)  weak local currencies. 
D)  all of the above are advantages. 
A)  strong local demand for products. 
B)  low production costs. 
C)  weak local currencies. 
D)  all of the above are advantages.

Question 6

Most of the DFI by U.S.firms is Mexico.

Accepted Answer

A) True 
 B)False

Question 7

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 A or B 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 A or B is possible. 
D)  have no impact on national problems.

Question 8

Due to market imperfections,the cost of factors of production (such as labor)may differ substantially across countries.

Accepted Answer

A) True 
 B)False

Question 9

To use foreign factors of production,an MNC should:

Accepted Answer

A)  establish a subsidiary in a new market that can sell products produced elsewhere. 
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. 
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 10

Although direct foreign investment is sometimes conducted,benefits are rarely realized.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

Assume the correlation coefficient between the returns on the existing project and the return on a proposed foreign project is 1.Also assume the returns on existing project and the new project are equal,and that the existing project has a lower standard deviation than the proposed project.Under this scenario,undertaking the proposed project will ___________ the variance of the firm's overall returns.

Accepted Answer

A)  decrease 
B)  increase 
C)  decrease or increase, depending on the exact size of the returns and standard deviations 
D)  none of the above 
A)  decrease 
B)  increase 
C)  decrease or increase, depending on the exact size of the returns and standard deviations 
D)  none of the above

Question 13

According to information in 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)  B and C 
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)  B and C

Question 14

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)  A and B 
D)  none of the above 
A)  focuses solely on one product. 
B)  focuses solely on one location to market what it produces. 
C)  A and B 
D)  none of the above

Question 15

When a foreign currency is perceived by a firm to be undervalued,the firm may consider direct foreign investment in that country,as the initial outlay should be relatively low.

Accepted Answer

A) True 
 B)False

Question 16

Direct foreign investment (DFI)represents investment in real assets (such as land,buildings,or even existing plants)in foreign countries.

Accepted Answer

A) True 
 B)False

Question 17

Generally speaking,direct foreign investment by U.S.firms is common in ________ but not to common in _________.

Accepted Answer

A)  Europe;Canada 
B)  Asia;Europe 
C)  Europe;Asia 
D)  none of the above 
A)  Europe;Canada 
B)  Asia;Europe 
C)  Europe;Asia 
D)  none of the above

Question 18

Along the frontier of efficient project portfolios,exactly one portfolio can be singled out as "optimal" for all MNCs.

Accepted Answer

A) True 
 B)False

Question 19

Consider a country that presently has a high level of unemployment because of weak economic conditions.Its income levels are very low.This country may be an attractive target as a result of ______ motives by U.S.firms that engage in direct foreign investment.

Accepted Answer

A)  revenue-related 
B)  cost-related 
C)  A and B 
D)  none of the above 
A)  revenue-related 
B)  cost-related 
C)  A and B 
D)  none of the above

Question 20

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 American sales by shift ing operations from their British subsidiaries to Japan. 
B)  British exporters can increase American sales by shifting operations from their Japanese subsidiaries to Britain. 
C)  American exporters can increase sales to Japan by shift ing operations from Japanese subsidiaries to American subsidiaries. 
D)  B and C 
A)  Japanese exporters can increase American sales by shift ing operations from their British subsidiaries to Japan. 
B)  British exporters can increase American sales by shifting operations from their Japanese subsidiaries to Britain. 
C)  American exporters can increase sales to Japan by shift ing operations from Japanese subsidiaries to American subsidiaries. 
D)  B and C

A firm will likely benefit most from diversifying if:

Direct foreign investment would typically be welcomed if:

From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:

Consider Firm "A" and Firm "B" that both produce the same product. Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were and the number of foreign countries it sold products to was .

Which of the following is not an advantage resulting from the Asian crisis that would favor direct foreign investment in Asia

Most of the DFI by U.S.firms is Mexico.

Direct foreign investment is perceived by foreign governments to:

Due to market imperfections,the cost of factors of production (such as labor)may differ substantially across countries.

To use foreign factors of production,an MNC should:

Although direct foreign investment is sometimes conducted,benefits are rarely realized.

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.

According to information in 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:

When a foreign currency is perceived by a firm to be undervalued,the firm may consider direct foreign investment in that country,as the initial outlay should be relatively low.

Direct foreign investment (DFI)represents investment in real assets (such as land,buildings,or even existing plants)in foreign countries.

Generally speaking,direct foreign investment by U.S.firms is common in but not to common in _.

Along the frontier of efficient project portfolios,exactly one portfolio can be singled out as "optimal" for all MNCs.

Consider a country that presently has a high level of unemployment because of weak economic conditions.Its income levels are very low.This country may be an attractive target as a result of ______ motives by U.S.firms that engage in direct foreign investment.

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

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

Multinational Restructuring

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 13: Direct Foreign Investment

A firm will likely benefit most from diversifying if:

Direct foreign investment would typically be welcomed if:

From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:

Consider Firm "A" and Firm "B" that both produce the same product. Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were __________ and the number of foreign countries it sold products to was __________.

Which of the following is not an advantage resulting from the Asian crisis that would favor direct foreign investment in Asia

Most of the DFI by U.S.firms is Mexico.

Direct foreign investment is perceived by foreign governments to:

Due to market imperfections,the cost of factors of production (such as labor)may differ substantially across countries.

To use foreign factors of production,an MNC should:

Although direct foreign investment is sometimes conducted,benefits are rarely realized.

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.

According to information in 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:

When a foreign currency is perceived by a firm to be undervalued,the firm may consider direct foreign investment in that country,as the initial outlay should be relatively low.

Direct foreign investment (DFI)represents investment in real assets (such as land,buildings,or even existing plants)in foreign countries.

Generally speaking,direct foreign investment by U.S.firms is common in ________ but not to common in _________.

Along the frontier of efficient project portfolios,exactly one portfolio can be singled out as "optimal" for all MNCs.

Consider a country that presently has a high level of unemployment because of weak economic conditions.Its income levels are very low.This country may be an attractive target as a result of ______ motives by U.S.firms that engage in direct foreign investment.

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

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

Multinational Restructuring

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Consider Firm "A" and Firm "B" that both produce the same product. Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were and the number of foreign countries it sold products to was .

Generally speaking,direct foreign investment by U.S.firms is common in but not to common in _.