Question 1

When an MNC 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 C

Question 2

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 shifting 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 shifting operations from Japanese subsidiaries to American subsidiaries. 
D) B and C 
A) Japanese exporters can increase American sales by shifting 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 shifting operations from Japanese subsidiaries to American subsidiaries. 
D) B and C A

Question 3

The best way to accomplish the revenue-related motive of attracting new sources of demand is to:

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. B

Question 4

____ 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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

When economic conditions of two countries are ____, an MNC 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 8

____ is not a disadvantage of direct foreign investment.

Accepted Answer

A) The expense of establishing a foreign subsidiary 
B) The uncertainty of inflation and exchange rate movements 
C) Political risk 
D) All of the above are disadvantages of direct foreign investment. 
A) The expense of establishing a foreign subsidiary 
B) The uncertainty of inflation and exchange rate movements 
C) Political risk 
D) All of the above are disadvantages of direct foreign investment.

Question 9

Managers of MNCs may attempt to expand their divisions internationally if their compensation may be increased as a result of expansion. This goal is consistent with the goals of shareholders.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

An MNC's cash flows are likely to be less volatile if its percentage of foreign sales is ____ and the number of foreign countries it sells products to is ____.

Accepted Answer

A) high; large 
B) high; small 
C) low; small. 
D) high; large. 
A) high; large 
B) high; small 
C) low; small. 
D) high; large.

Question 13

Direct foreign investment is commonly considered by MNCs because it allows the MNC to:

Accepted Answer

A) attract new sources of demand. 
B) enter profitable markets. 
C) react to exchange rate movements. 
D) react to trade restrictions. 
E) all of the above 
A) attract new sources of demand. 
B) enter profitable markets. 
C) react to exchange rate movements. 
D) react to trade restrictions. 
E) all of the above

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

MNCs can probably achieve more desirable risk-return characteristics from their project portfolios if they sufficiently diversify among products and geographical markets.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

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

Question 20

Even if production costs are higher in a foreign country, a U.S. MNC may establish a manufacturing plant in the foreign country now if the government of that country:

Accepted Answer

A) eliminates all quotas. 
B) reduces all quotas. 
C) increases all quotas. 
D) eliminates all tariffs. 
A) eliminates all quotas. 
B) reduces all quotas. 
C) increases all quotas. 
D) eliminates all tariffs.

Exam 13: Direct Foreign Investment

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

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

The best way to accomplish the revenue-related motive of attracting new sources of demand is to:

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

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

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

When economic conditions of two countries are ____, an MNC would ____ its risk by operating in both countries instead of concentrating just in one.

____ is not a disadvantage of direct foreign investment.

Managers of MNCs may attempt to expand their divisions internationally if their compensation may be increased as a result of expansion. This goal is consistent with the goals of shareholders.

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

Direct foreign investment is perceived by foreign governments to:

An MNC's cash flows are likely to be less volatile if its percentage of foreign sales is ____ and the number of foreign countries it sells products to is ____.

Direct foreign investment is commonly considered by MNCs because it allows the MNC to:

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

MNCs can probably achieve more desirable risk-return characteristics from their project portfolios if they sufficiently diversify among products and geographical markets.

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

Which of the following is a reason to consider international business?

According to the text, a firm may be able to achieve a "more efficient" project portfolio if it:

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

Even if production costs are higher in a foreign country, a U.S. MNC may establish a manufacturing plant in the foreign country now if the government of that country:

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

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

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

When economic conditions of two countries are , an MNC would its risk by operating in both countries instead of concentrating just in one.

An MNC's cash flows are likely to be less volatile if its percentage of foreign sales is and the number of foreign countries it sells products to is .