Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs​

Accepted Answer

A) True 
 B)False  False

Question 3

According to the text, licensing allows a firm to:

Accepted Answer

A) import without being subject to government restrictions. 
B) provide its technology for a fee. 
C) export without government restrictions. 
D) none of the above 
A) import without being subject to government restrictions. 
B) provide its technology for a fee. 
C) export without government restrictions. 
D) none of the above B

Question 4

A centralized management style for an MNC results in relatively high agency costs.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) establishing a centralized database of information. 
B) ensuring that all data are reported consistently among subsidiaries. 
C) ensuring that the MNC always borrows from countries where interest rates are lowest. 
D) using a system that checks internal data for unusual discrepancies. 
A) establishing a centralized database of information. 
B) ensuring that all data are reported consistently among subsidiaries. 
C) ensuring that the MNC always borrows from countries where interest rates are lowest. 
D) using a system that checks internal data for unusual discrepancies.

Question 6

A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in a franchise in exchange for periodic fees.

Accepted Answer

A) True 
 B)False

Question 7

Compared to other methods of international business, international trade generally results in ____ exposure to international political risk and ____ exposure to international economic conditions.

Accepted Answer

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

Question 8

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

Accepted Answer

A) the MNC's required rate of return. 
B) the amount of the MNC's cash flows in a particular currency. 
C) the exchange rate at which cash flows are converted to dollars. 
D) all of the above factors 
A) the MNC's required rate of return. 
B) the amount of the MNC's cash flows in a particular currency. 
C) the exchange rate at which cash flows are converted to dollars. 
D) all of the above factors

Question 9

Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not normally want to take control of it and therefore have no influence over management of the MNC.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a way in which agency problems can be reduced through corporate control?

Accepted Answer

A) executive compensation 
B) threat of hostile takeover 
C) acquisition of a foreign subsidiary 
D) monitoring by large shareholders 
A) executive compensation 
B) threat of hostile takeover 
C) acquisition of a foreign subsidiary 
D) monitoring by large shareholders

Question 11

The theory of comparative advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.

Accepted Answer

A) True 
 B)False

Question 12

Due to the risks involved in international business, firms should:

Accepted Answer

A) only consider international business in major countries. 
B) maintain international business to no more than 20% of total business. 
C) maintain international business to no more than 35% of total business. 
D) none of the above 
A) only consider international business in major countries. 
B) maintain international business to no more than 20% of total business. 
C) maintain international business to no more than 35% of total business. 
D) none of the above

Question 13

With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

Accepted Answer

A) shareholder wealth; short-term earnings 
B) shareholder wealth; shareholder wealth 
C) short-term earnings; sales volume 
D) short-term earnings; shareholder wealth 
A) shareholder wealth; short-term earnings 
B) shareholder wealth; shareholder wealth 
C) short-term earnings; sales volume 
D) short-term earnings; shareholder wealth

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency problems.

Accepted Answer

A) True 
 B)False

Question 16

The valuation of an MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows remitted by the subsidiaries.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not an example of political risk?​

Accepted Answer

A) Government may impose taxes on a subsidiary. 
B) Government may impose barriers on a subsidiary. 
C) Consumers may boycott the MNC. 
D) Consumers' income levels may decrease, thus decreasing consumption. 
A) Government may impose taxes on a subsidiary. 
B) Government may impose barriers on a subsidiary. 
C) Consumers may boycott the MNC. 
D) Consumers' income levels may decrease, thus decreasing consumption.

Question 18

The parent of an MNC can implement compensation plans that directly reward the subsidiary managers for enhancing the value of the MNC.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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?​

Accepted Answer

A) a weaker Mexican economy 
B) lower Mexican interest rates 
C) depreciation of the Mexican peso 
D) appreciation of the Mexican peso. 
A) a weaker Mexican economy 
B) lower Mexican interest rates 
C) depreciation of the Mexican peso 
D) appreciation of the Mexican peso.

Exam 1: Multinational Financial Management: An Overview

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

U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs​

According to the text, licensing allows a firm to:

A centralized management style for an MNC results in relatively high agency costs.

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

A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in a franchise in exchange for periodic fees.

Compared to other methods of international business, international trade generally results in ____ exposure to international political risk and ____ exposure to international economic conditions.

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

Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not normally want to take control of it and therefore have no influence over management of the MNC.

Which of the following is not a way in which agency problems can be reduced through corporate control?

The theory of comparative advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.

Due to the risks involved in international business, firms should:

With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

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

One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency problems.

The valuation of an MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows remitted by the subsidiaries.

Which of the following is not an example of political risk?​

The parent of an MNC can implement compensation plans that directly reward the subsidiary managers for enhancing the value of the MNC.

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

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?​

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 Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs

Compared to other methods of international business, international trade generally results in exposure to international political risk and exposure to international economic conditions.

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

With regard to corporate goals, an MNC is mostly concerned with maximizing , and a purely domestic firm is mostly concerned with maximizing .

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

Which of the following is not an example of political risk?

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?