Question 1

Generally speaking,currency risk decreases as time prior to acquisition of a foreign firm decreases.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would NOT be a potential reason for firms to pursue a cross-border merger or acquisition?

Accepted Answer

A) gaining access to strategic proprietary assets 
B) gaining market power and dominance 
C) diversification and the spreading of risk 
D) All of the above are potential reasons for an M & A. 
A) gaining access to strategic proprietary assets 
B) gaining market power and dominance 
C) diversification and the spreading of risk 
D) All of the above are potential reasons for an M & A.

Question 3

TABLE 16.1
Use the information to answer the following question(s).
Jensen Aquatics Inc., which manufactures and sells scuba gear worldwide, is considering an investment in either Europe or Great Britain. Consider the following cash flows for each project, assume a 12% wacc, and consider these to be average risk projects for the firm. Answer the questions that follow.
  
-Refer to Table 16.1.Which of the following best summarizes the preliminary results of the investment analysis for the two prospective investments?

Accepted Answer

A) The British investment should be accepted, the European investment rejected. 
B) The British investment is superior to the European investment. 
C) Both investments are acceptable. 
D) None of the above is true. 
A) The British investment should be accepted, the European investment rejected. 
B) The British investment is superior to the European investment. 
C) Both investments are acceptable. 
D) None of the above is true.

Question 4

Real option analysis is a particularly powerful device when addressing potential investment projects ________.

Accepted Answer

A) that do not commence until future dates. 
B) with extremely long life spans. 
C) both A and B. 
D) None of the above. 
A) that do not commence until future dates. 
B) with extremely long life spans. 
C) both A and B. 
D) None of the above.

Question 5

Affiliate firms are consolidated on the parent's financial statements on a ________ basis.

Accepted Answer

A) prorated 
B) 50% 
C) 75% 
D) 100% 
A) prorated 
B) 50% 
C) 75% 
D) 100%

Question 6

The authors highlight a strong theoretical argument in favor of analyzing any foreign project from the viewpoint of the parent.Provide at least three reasons why the parent's viewpoint is superior to the local viewpoint and give an example of when the local viewpoint fails to maximize the value of the firm.

Accepted Answer

A project might have a positive NPV from

Question 7

Calculate the cost of equity for Boston Industries using the following information: The cost of debt is 7%,the corporate tax rate is 40%,the rate on Treasury Bills is 4%,the firm has a beta of 1.1,and the expected return on the market is 12%.

Accepted Answer

A) 12.8% 
B) 12.6% 
C) 13.2% 
D) 6.6% 
A) 12.8% 
B) 12.6% 
C) 13.2% 
D) 6.6%

Question 8

When estimating a firm's cost of equity capital using the CAPM,you need to estimate

Accepted Answer

A) the risk-free rate of return. 
B) the expected return on the market portfolio. 
C) the firm's beta. 
D) all of the above. 
A) the risk-free rate of return. 
B) the expected return on the market portfolio. 
C) the firm's beta. 
D) all of the above.

Question 9

The traditional financial analysis applied to foreign or domestic projects,to determine the project's value to the firm is called ________.

Accepted Answer

A) cost of capital analysis 
B) capital budgeting 
C) capital structure analysis 
D) agency theory 
A) cost of capital analysis 
B) capital budgeting 
C) capital structure analysis 
D) agency theory

Question 10

For international investments,relative to project cash flows,parent cash flows are often dependent on the form of financing.

Accepted Answer

A) True 
 B)False

Question 11

Generally speaking,a firm wants to receive cash flows in a currency that is ________ relative to their own,and pay out in currencies that are ________ relative to their home currency.

Accepted Answer

A) appreciating; depreciating 
B) depreciating; depreciating 
C) appreciating; appreciating 
D) depreciating; appreciating 
A) appreciating; depreciating 
B) depreciating; depreciating 
C) appreciating; appreciating 
D) depreciating; appreciating

Question 12

Compared to a greenfield investment,list advantages and disadvantages of a cross-border merger or acquisition.

Accepted Answer

As opposed to greenfield investment,a cr

Question 13

A foreign firm that is 20% to 49% owned by a parent is called a/an ________.

Accepted Answer

A) subsidiary 
B) affiliate 
C) partner 
D) rival 
A) subsidiary 
B) affiliate 
C) partner 
D) rival

Question 14

For financial reporting purposes,U.S.firms must consolidate the earnings of any subsidiary that is over ________ owned.

Accepted Answer

A) 20% 
B) 40% 
C) 50% 
D) 75% 
A) 20% 
B) 40% 
C) 50% 
D) 75%

Question 15

What is real option analysis? How does it differ from the discounted cash flow approach to project evaluation? Why do some decision-makers prefer the real option approach over the DCF approach?

Accepted Answer

Real options is a different way of think

Question 16

At its core,real option analysis is a cross between decision-tree analysis and pure option-based valuation.

Accepted Answer

A) True 
 B)False

Generally speaking,currency risk decreases as time prior to acquisition of a foreign firm decreases.

Which of the following would NOT be a potential reason for firms to pursue a cross-border merger or acquisition?

Real option analysis is a particularly powerful device when addressing potential investment projects ________.

Affiliate firms are consolidated on the parent's financial statements on a ________ basis.

Calculate the cost of equity for Boston Industries using the following information: The cost of debt is 7%,the corporate tax rate is 40%,the rate on Treasury Bills is 4%,the firm has a beta of 1.1,and the expected return on the market is 12%.

When estimating a firm's cost of equity capital using the CAPM,you need to estimate

The traditional financial analysis applied to foreign or domestic projects,to determine the project's value to the firm is called ________.

For international investments,relative to project cash flows,parent cash flows are often dependent on the form of financing.

Generally speaking,a firm wants to receive cash flows in a currency that is relative to their own,and pay out in currencies that are relative to their home currency.

Compared to a greenfield investment,list advantages and disadvantages of a cross-border merger or acquisition.

A foreign firm that is 20% to 49% owned by a parent is called a/an ________.

For financial reporting purposes,U.S.firms must consolidate the earnings of any subsidiary that is over ________ owned.

What is real option analysis? How does it differ from the discounted cash flow approach to project evaluation? Why do some decision-makers prefer the real option approach over the DCF approach?

At its core,real option analysis is a cross between decision-tree analysis and pure option-based valuation.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Exam 16: Multinational Capital Budgeting and Cross-Border Acquisitions

Generally speaking,currency risk decreases as time prior to acquisition of a foreign firm decreases.

Which of the following would NOT be a potential reason for firms to pursue a cross-border merger or acquisition?

Real option analysis is a particularly powerful device when addressing potential investment projects ________.

Affiliate firms are consolidated on the parent's financial statements on a ________ basis.

Calculate the cost of equity for Boston Industries using the following information: The cost of debt is 7%,the corporate tax rate is 40%,the rate on Treasury Bills is 4%,the firm has a beta of 1.1,and the expected return on the market is 12%.

When estimating a firm's cost of equity capital using the CAPM,you need to estimate

The traditional financial analysis applied to foreign or domestic projects,to determine the project's value to the firm is called ________.

For international investments,relative to project cash flows,parent cash flows are often dependent on the form of financing.

Generally speaking,a firm wants to receive cash flows in a currency that is ________ relative to their own,and pay out in currencies that are ________ relative to their home currency.

Compared to a greenfield investment,list advantages and disadvantages of a cross-border merger or acquisition.

A foreign firm that is 20% to 49% owned by a parent is called a/an ________.

For financial reporting purposes,U.S.firms must consolidate the earnings of any subsidiary that is over ________ owned.

What is real option analysis? How does it differ from the discounted cash flow approach to project evaluation? Why do some decision-makers prefer the real option approach over the DCF approach?

At its core,real option analysis is a cross between decision-tree analysis and pure option-based valuation.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Generally speaking,a firm wants to receive cash flows in a currency that is relative to their own,and pay out in currencies that are relative to their home currency.