Question 1

Which of the following statements in not true about a centralized cash depository?

Accepted Answer

A)  All cash is remitted to the central cash pool. 
B)  Excess cash is remitted to the central cash pool. 
C)  The central cash manager arranges to cover shortages of cash. 
D)  It facilitates fund mobilization. 
A)  All cash is remitted to the central cash pool. 
B)  Excess cash is remitted to the central cash pool. 
C)  The central cash manager arranges to cover shortages of cash. 
D)  It facilitates fund mobilization.

Question 2

Soleil Inc.has an affiliate in Brazil and one in South Africa.The entire production of the South Africa affiliate is sold to the affiliate in Brazil which sells the final product to customers.The Brazilian affiliate has sales of 1000 and overhead costs of 100.The cost of goods sold in South Africa is 500 and overhead amounts to 300.The income tax rates are 40 percent in Brazil and 20 percent in South Africa.Assume that neither South Africa nor Brazil put any restrictions on the transfer price.What is the optimal transfer price?
 What are the total taxes paid?

Accepted Answer

@#IMG-DLM& The optimal transfe

Question 3

In reference to establishing "transfer prices" between the affiliates of an MNC,which of the following relates to the "resale" price approach?

Accepted Answer

A)  Comparable uncontrolled price between unrelated firms. 
B)  The price at which the good is resold by the distribution affiliate is reduced by an amount to cover overhead costs and a reasonable profit. 
C)  Assumes that the manufacturing cost is readily available. 
D)  Is based on financial and economic models and econometric techniques. 
A)  Comparable uncontrolled price between unrelated firms. 
B)  The price at which the good is resold by the distribution affiliate is reduced by an amount to cover overhead costs and a reasonable profit. 
C)  Assumes that the manufacturing cost is readily available. 
D)  Is based on financial and economic models and econometric techniques.

Question 4

The following information is available for Company ABC.
(All amounts provided are in US dollars)
$\begin{array}{lll}
&\text { Manufacturing Affiliate } & \text { Sales Affiliate } \
&\text { (Canada, income tax rate: } & \text { (United States, income } \
&40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\
\text { Sales } & \_\_\_& \$ 10,000 \
\text { Cost of goods sold } & 5,000 &\_\_\_ \
\text { Operating expenses } & 1,000 & \$ 1,000\ \text { Taxable income}\ \text { Income taxes}\ \text {Net income }\
\end{array}$
-If Canada changes its corporate income tax to 35%,does the optimum transfer price change?

Accepted Answer

A)  Yes, it increases. 
B)  Yes, it decreases. 
C)  No, it doesn't change. 
D)  Need more information. 
A)  Yes, it increases. 
B)  Yes, it decreases. 
C)  No, it doesn't change. 
D)  Need more information.

Question 5

If foreign exchange transactions cost ABC 0.45 percent,what savings results from netting?

Accepted Answer

A)  S$684 
B)  S$765 
C)  S$1,449 
D)  S$1,823 
A)  S$684 
B)  S$765 
C)  S$1,449 
D)  S$1,823

Question 6

Explain why governments regulate transfer prices for international transactions.What are the major rules that are applied?

Accepted Answer

The transfer price is the price assigned

Question 7

Affiliate X sells 10,000 units to Affiliate Y per year. The marginal tax rates for X and Y are 20 percent and 30 percent respectively. The transfer price per unit is currently set at $1,000, but it can go as high as $1,250.
-Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used.

Accepted Answer

A)  $250,000 
B)  $500,000 
C)  $1,000,000 
D)  $1,250,000 
A)  $250,000 
B)  $500,000 
C)  $1,000,000 
D)  $1,250,000

Question 8

Which of the following helps to reduce the optimal size of the precautionary cash balances?

Accepted Answer

A)  Transfer pricing. 
B)  Centralized cash depositary. 
C)  Differential income tax rates. 
D)  None of these. 
A)  Transfer pricing. 
B)  Centralized cash depositary. 
C)  Differential income tax rates. 
D)  None of these.

Which of the following statements in not true about a centralized cash depository?

In reference to establishing "transfer prices" between the affiliates of an MNC,which of the following relates to the "resale" price approach?

If foreign exchange transactions cost ABC 0.45 percent,what savings results from netting?

Explain why governments regulate transfer prices for international transactions.What are the major rules that are applied?

Which of the following helps to reduce the optimal size of the precautionary cash balances?

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters

Exam 18: Multinational Cash Management

Which of the following statements in not true about a centralized cash depository?

In reference to establishing "transfer prices" between the affiliates of an MNC,which of the following relates to the "resale" price approach?

If foreign exchange transactions cost ABC 0.45 percent,what savings results from netting?

Explain why governments regulate transfer prices for international transactions.What are the major rules that are applied?

Which of the following helps to reduce the optimal size of the precautionary cash balances?

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters