Question 1

Like income tax treaties,____________ help to avoid double taxation and stimulate direct foreign investment.

Accepted Answer

A)  withholding taxes 
B)  excise taxes 
C)  tax credits 
D)  carryforwards 
A)  withholding taxes 
B)  excise taxes 
C)  tax credits 
D)  carryforwards

Question 2

If an MNC exports to a country,then establishes a subsidiary to produce and sell the same product in the country,then cash flows from prevailing operations would likely be _______ affected by the project.  If an MNC establishes a foreign manufacturing subsidiary that buys components from the parent,the cash flows from prevailing operations would likely be _______ affected by the project.

Accepted Answer

A)  adversely;adversely 
B)  favorably;adversely 
C)  favorably;favorably 
D)  adversely;favorably 
A)  adversely;adversely 
B)  favorably;adversely 
C)  favorably;favorably 
D)  adversely;favorably

Question 3

Assume an MNC establishes a subsidiary where it has no other existing business.  The present value of parent cash flows from this subsidiary is more sensitive to exchange rate movements when:

Accepted Answer

A)  the subsidiary finances the entire investment by local borrowing. 
B)  the subsidiary finances most of the investment by local borrowing. 
C)  the parent finances most of the investment. 
D)  the parent finances the entire investment. 
A)  the subsidiary finances the entire investment by local borrowing. 
B)  the subsidiary finances most of the investment by local borrowing. 
C)  the parent finances most of the investment. 
D)  the parent finances the entire investment.

Question 4

According to the text,in order to develop a distribution of possible net present values from international projects,a firm should use:

Accepted Answer

A)  a risk adjusted discount rate. 
B)  payback period. 
C)  certainty equivalents. 
D)  simulation. 
A)  a risk adjusted discount rate. 
B)  payback period. 
C)  certainty equivalents. 
D)  simulation.

Question 5

The break-even salvage value of a particular project is the salvage value necessary to:

Accepted Answer

A)  offset any losses incurred by the subsidiary in a given year. 
B)  offset any losses incurred by the MNC overall in a given year. 
C)  make the project have zero profits. 
D)  make the project's return equal the required rate of return. 
A)  offset any losses incurred by the subsidiary in a given year. 
B)  offset any losses incurred by the MNC overall in a given year. 
C)  make the project have zero profits. 
D)  make the project's return equal the required rate of return.

Question 6

If a U.S.parent is setting up a French subsidiary,and funds from the subsidiary will be periodically sent to the parent,the ideal situation from the parent's perspective is a ____ after the subsidiary is established.

Accepted Answer

A)  strengthening euro 
B)  stable euro 
C)  weak euro 
D)  B and C are both ideal. 
A)  strengthening euro 
B)  stable euro 
C)  weak euro 
D)  B and C are both ideal.

Question 7

Exchange rates for purposes of multinational capital budgeting:

Accepted Answer

A)  are very difficult to forecast. 
B)  can be easily hedged with currency swaps. 
C)  are unimportant, as they do not affect the cash flows of the multinational project. 
D)  all of the above 
A)  are very difficult to forecast. 
B)  can be easily hedged with currency swaps. 
C)  are unimportant, as they do not affect the cash flows of the multinational project. 
D)  all of the above

Question 8

Assume that NOK8,000,000 of the cash flow in year 4 represents the salvage value.Baps is not completely certain that the salvage value will be this amount and wishes to determine the break-even salvage value,which is $___________.

Accepted Answer

A)  510,088.04 
B)  1,710,088 
C)  1,040,000 
D)  none of the above 
A)  510,088.04 
B)  1,710,088 
C)  1,040,000 
D)  none of the above

Question 9

A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5.The NPV for this project will be higher if the foreign currency _________ in year 1 and _________ in years 2 though 5.

Accepted Answer

A)  depreciates;depreciates 
B)  appreciates;appreciates 
C)  depreciates;appreciates 
D)  appreciates;depreciates 
A)  depreciates;depreciates 
B)  appreciates;appreciates 
C)  depreciates;appreciates 
D)  appreciates;depreciates

Like income tax treaties,____________ help to avoid double taxation and stimulate direct foreign investment.

Assume an MNC establishes a subsidiary where it has no other existing business. The present value of parent cash flows from this subsidiary is more sensitive to exchange rate movements when:

According to the text,in order to develop a distribution of possible net present values from international projects,a firm should use:

The break-even salvage value of a particular project is the salvage value necessary to:

If a U.S.parent is setting up a French subsidiary,and funds from the subsidiary will be periodically sent to the parent,the ideal situation from the parent's perspective is a ____ after the subsidiary is established.

Exchange rates for purposes of multinational capital budgeting:

Assume that NOK8,000,000 of the cash flow in year 4 represents the salvage value.Baps is not completely certain that the salvage value will be this amount and wishes to determine the break-even salvage value,which is $___________.

A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5.The NPV for this project will be higher if the foreign currency _ in year 1 and _ in years 2 though 5.

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

Direct Foreign Investment

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 14: Multinational Capital Budgeting

Like income tax treaties,____________ help to avoid double taxation and stimulate direct foreign investment.

Assume an MNC establishes a subsidiary where it has no other existing business. The present value of parent cash flows from this subsidiary is more sensitive to exchange rate movements when:

According to the text,in order to develop a distribution of possible net present values from international projects,a firm should use:

The break-even salvage value of a particular project is the salvage value necessary to:

If a U.S.parent is setting up a French subsidiary,and funds from the subsidiary will be periodically sent to the parent,the ideal situation from the parent's perspective is a ____ after the subsidiary is established.

Exchange rates for purposes of multinational capital budgeting:

Assume that NOK8,000,000 of the cash flow in year 4 represents the salvage value.Baps is not completely certain that the salvage value will be this amount and wishes to determine the break-even salvage value,which is $___________.

A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5.The NPV for this project will be higher if the foreign currency _________ in year 1 and _________ in years 2 though 5.

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

Direct Foreign Investment

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

A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5.The NPV for this project will be higher if the foreign currency _ in year 1 and _ in years 2 though 5.