Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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. 
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 3

Which of the following is a reason to consider international business

Accepted Answer

A)  economies of scale. 
B)  exploit monopolistic advantages. 
C)  diversification. 
D)  all of the above 
A)  economies of scale. 
B)  exploit monopolistic advantages. 
C)  diversification. 
D)  all of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not true regarding host government attitudes towards direct foreign investment (DFI)

Accepted Answer

A)  Host governments may offer incentives to MNCs in the form of subsidies in certain circumstances. 
B)  Host governments generally perceive DFI as a remedy to eliminate a country's political problems. 
C)  The ability of a host government to attract DFI is dependent on the country's markets and resources. 
D)  Some types of DFI will be more attractive to some governments than to others. 
E)  All of the above are true. 
A)  Host governments may offer incentives to MNCs in the form of subsidies in certain circumstances. 
B)  Host governments generally perceive DFI as a remedy to eliminate a country's political problems. 
C)  The ability of a host government to attract DFI is dependent on the country's markets and resources. 
D)  Some types of DFI will be more attractive to some governments than to others. 
E)  All of the above are true.

Question 6

When economic conditions of two countries are ________,then a firm 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 the above 
A)  highly correlated;reduce 
B)  not highly correlated;not reduce 
C)  not highly correlated;reduce 
D)  none of the above

Question 7

Based on the text,it should be obvious that markets are__________ in reality,and consequently,monopolistic advantages _________ be exploited.

Accepted Answer

A)  perfect;may possibly 
B)  perfect;cannot 
C)  imperfect;may possibly 
D)  imperfect;cannot 
A)  perfect;may possibly 
B)  perfect;cannot 
C)  imperfect;may possibly 
D)  imperfect;cannot

Question 8

To enter markets where superior profits are possible,an MNC should:

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 9

They key to international diversification is selecting foreign projects whose performance levels are highly correlated over time.

Accepted Answer

A) True 
 B)False

Question 10

Countries that became part of the European Union in 2004 had high labor and production costs and therefore were not targeted for new DFI by MNCs that wanted to reduce manufacturing costs.

Accepted Answer

A) True 
 B)False

Question 11

MNCs often attempt to set up production in locations where land and labor are expensive,because expensive factors of production indicate high demand.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The __________ a project's variability in cash flows,and the __________ the positive correlation between the project's cash flow and MNC's cash flow,the lower the risk of the project.

Accepted Answer

A)  higher;higher 
B)  higher;lower 
C)  lower;lower 
D)  lower;higher 
A)  higher;higher 
B)  higher;lower 
C)  lower;lower 
D)  lower;higher

Question 14

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.

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

Question 15

Which of the following is not true regarding the efficient frontier considered by MNCs

Accepted Answer

A)  There is exactly one point on the efficient frontier that is optimal for every MNC, regardless of its degree of risk aversion. 
B)  The efficient frontier for international projects will probably lie to the left of the efficient frontier for domestic projects. 
C)  Each point on the efficient frontier represents a portfolio of projects as opposed to an individual project. 
D)  A and C are false. 
E)  All of the above are true. 
A)  There is exactly one point on the efficient frontier that is optimal for every MNC, regardless of its degree of risk aversion. 
B)  The efficient frontier for international projects will probably lie to the left of the efficient frontier for domestic projects. 
C)  Each point on the efficient frontier represents a portfolio of projects as opposed to an individual project. 
D)  A and C are false. 
E)  All of the above are true.

Question 16

______________ is not a revenue-related motive for direct foreign investment.

Accepted Answer

A)  Attracting new sources of demand 
B)  Fully benefiting from economies of scale 
C)  Exploiting monopolistic advantages 
D)  Entering profitable markets 
A)  Attracting new sources of demand 
B)  Fully benefiting from economies of scale 
C)  Exploiting monopolistic advantages 
D)  Entering profitable markets

Question 17

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.

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 18

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 arrange ments for products local firms produce. 
C)  encouraging foreign firms to establish subsidiaries that produce products local firms do not produce. 
D)  none of the above 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 arrange ments for products local firms produce. 
C)  encouraging foreign firms to establish subsidiaries that produce products local firms do not produce. 
D)  none of the above would reduce employment.

Question 19

To exploit monopolistic advantages,an MNC should:

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 where competitors are unable to produce the identical product. 
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 where competitors are unable to produce the identical product.

Question 20

When a firm 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)  A and B 
D)  none of the above 
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)  A and B 
D)  none of the above

Exam 13: Direct Foreign Investment

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

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

Which of the following is a reason to consider international business

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

Which of the following is not true regarding host government attitudes towards direct foreign investment (DFI)

When economic conditions of two countries are ________,then a firm would _______ its risk by operating in both countries instead of concentrating just in one.

Based on the text,it should be obvious that markets are__________ in reality,and consequently,monopolistic advantages _________ be exploited.

To enter markets where superior profits are possible,an MNC should:

They key to international diversification is selecting foreign projects whose performance levels are highly correlated over time.

Countries that became part of the European Union in 2004 had high labor and production costs and therefore were not targeted for new DFI by MNCs that wanted to reduce manufacturing costs.

MNCs often attempt to set up production in locations where land and labor are expensive,because expensive factors of production indicate high demand.

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

The __________ a project's variability in cash flows,and the __________ the positive correlation between the project's cash flow and MNC's cash flow,the lower the risk of the project.

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.

Which of the following is not true regarding the efficient frontier considered by MNCs

______________ is not a revenue-related motive for direct foreign investment.

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

To exploit monopolistic advantages,an MNC should:

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

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

When economic conditions of two countries are __,then a firm would _ its risk by operating in both countries instead of concentrating just in one.

Based on the text,it should be obvious that markets are__ in reality,and consequently,monopolistic advantages _ be exploited.

The a project's variability in cash flows,and the the positive correlation between the project's cash flow and MNC's cash flow,the lower the risk of the project.

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.