Question 1

Is it possible that a project has a positive APV from the subsidiary's perspective and a negative APV from the parent's perspective?

Accepted Answer

Yes,it is possible that a project has a

Question 2

Company X,a Canadian manufacturer of chairs,is currently exporting $100,000 worth of chairs to the United States.The firm is considering opening a production facility in the United States that would produce enough chairs for the entire US market and is predicting total sales in the United States to be $500,000.When analyzing this project,Company X should:

Accepted Answer

A)  ignore the exports of $100,000 since they are not an incremental cash flow from the project. 
B)  ignore the exports of $100,000 since they are not part of the project. 
C)  include $100,000 as lost export sales in the capital budget. 
D)  None of these. 
A)  ignore the exports of $100,000 since they are not an incremental cash flow from the project. 
B)  ignore the exports of $100,000 since they are not part of the project. 
C)  include $100,000 as lost export sales in the capital budget. 
D)  None of these.

Question 3

The financial manager's responsibilities involve:

Accepted Answer

A)  increasing the per share price of the company's stock at any cost and by any means, ways and fashion that is possible. 
B)  shareholder profit maximization. 
C)  which capital projects to select. 
D)  increasing the dividend yield of the company's shares by any means. 
A)  increasing the per share price of the company's stock at any cost and by any means, ways and fashion that is possible. 
B)  shareholder profit maximization. 
C)  which capital projects to select. 
D)  increasing the dividend yield of the company's shares by any means.

Question 4

(I) PV of Net Operating Cash Flows
(II) PV of Depreciation Tax Shield
(III) PV of the Benefit for the Concessionary Loan
(IV) PV of the Interest Tax Shield
(V) Initial cost of the project
-The discount rates to use for the APV calculations are:

Accepted Answer

A)  Cost of levered equity for (I) and cost of debt for (II), (III), (IV) and (V) 
B)  Cost of levered equity for (I) and cost of unlevered equity for (II), (III), (IV) and (V) 
C)  Cost of unlevered equity for (I) and cost of levered equity for (II), (III), (IV) and (V) 
D)  Cost of unlevered equity for (I) and cost of debt for (II), (III), (IV) and (V) 
A)  Cost of levered equity for (I) and cost of debt for (II), (III), (IV) and (V) 
B)  Cost of levered equity for (I) and cost of unlevered equity for (II), (III), (IV) and (V) 
C)  Cost of unlevered equity for (I) and cost of levered equity for (II), (III), (IV) and (V) 
D)  Cost of unlevered equity for (I) and cost of debt for (II), (III), (IV) and (V)

Question 5

Which of the following is not an example of a real option?

Accepted Answer

A)  Timing option 
B)  Abandonment option 
C)  Growth option 
D)  Exercise option 
A)  Timing option 
B)  Abandonment option 
C)  Growth option 
D)  Exercise option

Question 6

(I) PV of Net Operating Cash Flows
(II) PV of Depreciation Tax Shield
(III) PV of the Benefit for the Concessionary Loan
(IV) PV of the Interest Tax Shield
(V) Initial cost of the project
-The discount rates to use for the APV calculations are:

Accepted Answer

A)  Cost of domestic debt for (II),(III),(IV) and (V). 
B)  Cost of domestic debt for (II) and (IV). 
C)  Cost of foreign debt for (II),(III),(IV) and (V). 
D)  Cost of foreign debt for (II) and (IV). 
A)  Cost of domestic debt for (II),(III),(IV) and (V). 
B)  Cost of domestic debt for (II) and (IV). 
C)  Cost of foreign debt for (II),(III),(IV) and (V). 
D)  Cost of foreign debt for (II) and (IV).

Question 7

The ABC Company,a U.S.based MNC,plans to establish a subsidiary in Ecuador to manufacture and sell water pumps.ABC has total assets of $80 million,of which $60 million is equity financed.The remainder is financed with debt.ABC considers its current capital structure optimal.The construction cost of the facility in Ecuador is estimated to be ECS 8,500 million,of which ECS 6,500 million is to be financed at a below-market rate of interest arranged by the Ecuador's government.The proposed project will increase the borrowing capacity by:

Accepted Answer

A)  ECS 1,215 million 
B)  ECS 2,215 million 
C)  ECS 3,215 million 
D)  ECS 4,215 million 
A)  ECS 1,215 million 
B)  ECS 2,215 million 
C)  ECS 3,215 million 
D)  ECS 4,215 million

Question 8

Given the following information for a levered and unlevered firm,calculate the difference in the cash flow available to investors. $$\begin{array}{l}

\begin{array} { l r r } 
&\text { Levered} &\text { Unlevered }\
\text { Revenue } & \$ 250 & \$ 250 \
\text { Operating cost } & - \$ 100 & - \$ 100 \
\text { Interest expense } & - \$ 20 & \$ 0
\end{array}
\end{array}$$ Assume the corporate tax rate is 40%. (Hint: Calculate the tax savings arising from the tax deductibility of interest payments).

Accepted Answer

A)  8 
B)  18 
C)  78 
D)  90 
A)  8 
B)  18 
C)  78 
D)  90

Is it possible that a project has a positive APV from the subsidiary's perspective and a negative APV from the parent's perspective?

The financial manager's responsibilities involve:

(I) PV of Net Operating Cash Flows (II) PV of Depreciation Tax Shield (III) PV of the Benefit for the Concessionary Loan (IV) PV of the Interest Tax Shield (V) Initial cost of the project -The discount rates to use for the APV calculations are:

Which of the following is not an example of a real option?

(I) PV of Net Operating Cash Flows (II) PV of Depreciation Tax Shield (III) PV of the Benefit for the Concessionary Loan (IV) PV of the Interest Tax Shield (V) Initial cost of the project -The discount rates to use for the APV calculations are:

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

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters

Exam 17: International Capital Budgeting

Is it possible that a project has a positive APV from the subsidiary's perspective and a negative APV from the parent's perspective?

The financial manager's responsibilities involve:

(I) PV of Net Operating Cash Flows (II) PV of Depreciation Tax Shield (III) PV of the Benefit for the Concessionary Loan (IV) PV of the Interest Tax Shield (V) Initial cost of the project -The discount rates to use for the APV calculations are:

Which of the following is not an example of a real option?

(I) PV of Net Operating Cash Flows (II) PV of Depreciation Tax Shield (III) PV of the Benefit for the Concessionary Loan (IV) PV of the Interest Tax Shield (V) Initial cost of the project -The discount rates to use for the APV calculations are:

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

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters