Exam 1: Multinational Financial Management: An Overview

The commonly accepted goal of an MNC is to:

In determining the valuation of foreign projects, an MNC will always use the same required rate of return as it would for its domestic projects.

The Sarbanes-Oxley Act improved corporate governance of MNCs because it:

A purely domestic firm may be affected by exchange rate fluctuations if it faces at least some foreign competition.

Under the imperfect markets theory, it is assumed that factors of production are entirely mobile, so that firms can capitalize on a foreign country's resources.

Which of the following is an example of direct foreign investment?

The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to ____ and when the foreign currencies denominating these cash flows are expected?to ____.

For an MNC, agency costs are typically:

Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.

Which of the following is not one of the more common methods used by MNCs to improve their internal control process?​

The Sarbanes-Oxley Act (SOX), which was enacted in 2002, required MNCs and other firms to implement an internal reporting process that could be easily monitored by executives and the board of directors.

Agency costs faced by MNCs may be larger than those faced by purely domestic firms because:​

The agency costs of an MNC are likely to be lower if it:

If a U.S.-based MNC focused entirely on exporting, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time.

An MNC may be more exposed to agency problems if most of its shares are held by:

The goal of an MNC is to:​

A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's operations.

Assume that Live Co. has expected cash flows of $200,000 from domestic operations, 200,000 Swiss francs from Swiss operations, and 150,000 euros from Italian operations at the end of the year. The Swiss franc's value and the euro's value are expected to be $.83 and $1.29, respectively, at the end of this year. What are the expected dollar cash flows of Live Co?​

A centralized management style, where major decisions about a foreign subsidiary are made by the parent company, results in an increase in agency costs.