Exam 14: Funding the Multinational Firm

SEC rule 144A permits institutional buyers to trade privately placed securities without the previous holding periods restrictions and without requiring SEC registration.

In part because of access to global markets, MNEs are better able than their domestic counterparts to maintain their desired debt ratio even when raising new capital.

Who pays the costs of creating a sponsored ADR?

The least liquid stock markets offer little liquidity for their own domestic firms, and are of little value to foreign firms.

ADRs are considered an effective way for firms to improve the liquidity of their stock, especially if the home market is small and illiquid.

In theory multinational firms are in a better position than domestic firms to support higher debt ratios.

The term "euro" as used in the euro equity market implies:

Which of the following were NOT identified by the authors as a variable that needs to be modified in the domestic theory of optimal financial structures to accommodate the case of the multinational enterprise?

ADRs are a popular investment tool for many U.S. investors. In recent years several alternatives for investing in foreign equity securities have become available for U.S. investors, yet ADRs remain popular. Define what an ADR is and provide at least three examples of the advantages they may hold over alternative foreign investment vehicles for U.S. investors.

For firms to raise capital in international markets, it is more important to adhere to capital structure ratios similar to those found in the United States and United Kingdom than to those in the firm's home country.

Level I ADRs trade primarily:

Level III ADR commitment applies to:

A ________ is a bond underwritten by a syndicate from a single country, sold within in that country, denominated in that country's currency, but the issuer is from outside that country.

ADRs cannot be exchanged for the underlying shares of the foreign stock, therefore, arbitrage cannot keep the prices in line with the foreign price of the stock.

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro depreciates against the dollar from $1.40/€ at the time the loan was made to $1.35/€ at the end of the first year, how much interest and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest (rounded)?

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro appreciates against the dollar from $1.40/€ at the time the loan was made to $1.45/€ at the end of the first year, how much interest and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest (rounded)?

Which of the following is NOT an advantage of ADRs to U.S. shareholders?

Sourcing capital abroad usually follows a logic path. List in sequential order three corporate strategies in internationalizing the cost of capital.

In addition to gaining liquidity, which of the following could also be considered a legitimate reason for cross-listing equity?

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro depreciates against the dollar from $1.40/€ at the time the loan was made to $1.35/€ at the end of the first year, how much interest will TropiKana pay at the end of the first year (rounded)?