Question 1

Which of the following statements is false?

Accepted Answer

A)  Many countries regulate or limit capital inflows or outflows, and many do not allow their currencies to be freely converted into dollars, thereby creating capital market segmentation. 
B)  The existence of internationally integrated capital markets makes many decisions in international corporate finance more complicated but potentially more lucrative for a firm that is well positioned to exploit the market segmentation. 
C)  Political, legal, social, and cultural characteristics that differ across countries may require compensation in the form of a country risk premium. 
D)  Swaps allow firms to mitigate their exchange rate risk exposure between assets and liabilities, while still making investments and raising funds in the most attractive locales. 
A)  Many countries regulate or limit capital inflows or outflows, and many do not allow their currencies to be freely converted into dollars, thereby creating capital market segmentation. 
B)  The existence of internationally integrated capital markets makes many decisions in international corporate finance more complicated but potentially more lucrative for a firm that is well positioned to exploit the market segmentation. 
C)  Political, legal, social, and cultural characteristics that differ across countries may require compensation in the form of a country risk premium. 
D)  Swaps allow firms to mitigate their exchange rate risk exposure between assets and liabilities, while still making investments and raising funds in the most attractive locales.

Question 2

The risk of the foreign project is ________ the risk of Canadian domestic projects because the foreign project contains ________ that the domestic projects often do not contain.

Accepted Answer

A)  likely to be the same as; residual exchange rate risk 
B)  unlikely to be exactly the same as; residual exchange rate risk 
C)  likely to be the same as; residual inflation risk 
D)  unlikely to be exactly the same as; residual inflation risk 
A)  likely to be the same as; residual exchange rate risk 
B)  unlikely to be exactly the same as; residual exchange rate risk 
C)  likely to be the same as; residual inflation risk 
D)  unlikely to be exactly the same as; residual inflation risk

Question 3

Use the information for the question(s) below.
KT Enterprises, a Canadian import-export trading company, is considering its international tax situation. Currently KT's Canadian tax rate is 35%. KT has significant operations in both Japan and Ireland. In Japan the current exchange rate is ¥118.4/$ and earnings in Japan are taxed at 41%. In Ireland the current exchange rate is $1.27/€ and earnings in Ireland are taxed at 12.5%. KT's profits, which are fully and immediately repatriated, and foreign taxes paid for the current year are shown here (in millions):
  
-After the Irish taxes are paid,the amount of the earnings before interest and after taxes in dollars from the Ireland operations is closest to:

Accepted Answer

A)  $5.1 million 
B)  $20.5 million 
C)  $35.6 million 
D)  $29.5 million 
A)  $5.1 million 
B)  $20.5 million 
C)  $35.6 million 
D)  $29.5 million

Question 4

Currency swaps allow firms to mitigate their exchange rate risk exposure between ________,while still making investments and raising funds in the most attractive locales.

Accepted Answer

A)  assets and liabilities 
B)  long-term liabilities and equity 
C)  assets and equity 
D)  equity and liabilities 
A)  assets and liabilities 
B)  long-term liabilities and equity 
C)  assets and equity 
D)  equity and liabilities

Question 5

Which of the following statements is false?

Accepted Answer

A)  Differential access to national capital markets is common enough that it provides the best explanation for the existence of currency swaps, which are like the interest rate swap contracts, but with the holder receiving coupons in one currency and paying coupons denominated in a different currency. 
B)  Currency swaps generally also have final face value payments, also in different currencies. 
C)  Using a currency swap, a firm can borrow in the market where it has the best access to capital, and then "swap" the coupon and principal payments to whichever currency it would prefer to make payments in. 
D)  With differential access to national markets, to maximize shareholder value, the firm should raise capital in the foreign market; the method of valuing the foreign project as if it were a domestic project would then provide the correct NPV. 
A)  Differential access to national capital markets is common enough that it provides the best explanation for the existence of currency swaps, which are like the interest rate swap contracts, but with the holder receiving coupons in one currency and paying coupons denominated in a different currency. 
B)  Currency swaps generally also have final face value payments, also in different currencies. 
C)  Using a currency swap, a firm can borrow in the market where it has the best access to capital, and then "swap" the coupon and principal payments to whichever currency it would prefer to make payments in. 
D)  With differential access to national markets, to maximize shareholder value, the firm should raise capital in the foreign market; the method of valuing the foreign project as if it were a domestic project would then provide the correct NPV.

Which of the following statements is false?

The risk of the foreign project is the risk of Canadian domestic projects because the foreign project contains that the domestic projects often do not contain.

Currency swaps allow firms to mitigate their exchange rate risk exposure between ________,while still making investments and raising funds in the most attractive locales.

Which of the following statements is false?

The Corporation

Introduction to Financial Statement Analysis

Arbitrage and Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behaviour and Capital Market Efficiency

Financial Options

Option Valuation

Real Options

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modelling: a Case Study

The Mechanics of Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

Filters

Exam 31: International Corporate Finance

Which of the following statements is false?

The risk of the foreign project is ________ the risk of Canadian domestic projects because the foreign project contains ________ that the domestic projects often do not contain.

Currency swaps allow firms to mitigate their exchange rate risk exposure between ________,while still making investments and raising funds in the most attractive locales.

Which of the following statements is false?

The Corporation

Introduction to Financial Statement Analysis

Arbitrage and Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behaviour and Capital Market Efficiency

Financial Options

Option Valuation

Real Options

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modelling: a Case Study

The Mechanics of Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

Filters

The risk of the foreign project is the risk of Canadian domestic projects because the foreign project contains that the domestic projects often do not contain.