Exam 17: Multinational Capital Budgeting and Cross-Border Acquisitions

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.

Which of the following is NOT a reason why capital budgeting for a foreign project is more complex than for a domestic project?

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

Explain how political risk and exchange rate risk increase the uncertainty of international projects for the purpose of capital budgeting.

Project financing is the arrangement of financing for very large individual long-term capital projects.

Given a current spot rate of 8.10 Norwegian krone per U.S. dollar, expected inflation rates of 3% in Norway and 6% per annum in the U.S., use the formula for relative purchasing power parity to estimate the one-year spot rate of krone per dollar.

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

Which of the following is NOT a factor critical to the success of project financing?

Refer to Instruction 17.1. The European expansion would have a greater NPV in dollar terms if the euro appreciated in value over the five-year life of the project and the project had a positive NPV, other things equal.

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

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

Which is NOT considered a shortcoming of the parent simply adjusting discount rates to account for the additional risk that stems from a project's foreign location?