Question 1

Project evaluation from the ________ viewpoint serves some useful purposes and/but should ________ the ________ viewpoint.

Accepted Answer

A) local; be subordinated to; parent's 
B) local; not be subordinated to; parent's 
C) parent's; be subordinated to; local 
D) none of the above 
A) local; be subordinated to; parent's 
B) local; not be subordinated to; parent's 
C) parent's; be subordinated to; local 
D) none of the above

Question 2

Currency risk is a concern for any international merger and acquisition activity. For instance, the initial bid, if denominated in a foreign currency, creates a contingent foreign currency exposure for the bidder.

Accepted Answer

A) True 
 B)False

Question 3

Refer to Instruction 18.1. What is the initial investment for the Velo Rapid Revolutions project?

Accepted Answer

A) $1,500,000 
B) €1,600,000 
C) $1,600,000 
D) €1,500,000 
A) $1,500,000 
B) €1,600,000 
C) $1,600,000 
D) €1,500,000

Question 4

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

Accepted Answer

A) 20% 
B) 40% 
C) 50% 
D) 75% 
A) 20% 
B) 40% 
C) 50% 
D) 75%

Question 5

When determining a firm's weighted average cost of capital (wacc)which of the following terms is NOT necessary?

Accepted Answer

A) the firm's tax rate 
B) the firm's cost of debt 
C) the firm's cost of equity 
D) All of the above are necessary. 
A) the firm's tax rate 
B) the firm's cost of debt 
C) the firm's cost of equity 
D) All of the above are necessary.

Question 6

As opposed to greenfield investment, a cross-border acquisition is typically quicker.

Accepted Answer

A) True 
 B)False

Question 7

Refer to Instruction 18.1. What are the annual after-tax cash flows for the Velo Rapid Revolutions project?

Accepted Answer

A) €400,000 
B) €240,000 
C) €120,000 
D) €360,000 
A) €400,000 
B) €240,000 
C) €120,000 
D) €360,000

Question 8

In international capital budgeting, the appropriate discount rate for determining the present value of the
expected cash flows is always the firm's domestic WACC.

Accepted Answer

A) True 
 B)False

Question 9

The authors highlight a strong theoretical argument in favor of analyzing any foreign project from the viewpoint of the parent. Provide at least three reasons why the parent's viewpoint is superior to the local viewpoint and give an example of when the local viewpoint fails to maximize the value of the firm.

Accepted Answer

A project might have a positive NPV from

Question 10

When assessing the additional risk that can occur from investing abroad firms may choose to account for risk via:

Accepted Answer

A) adjusting the cash flows. 
B) adjusting the discount rates. 
C) adjusting both cash flows and discount rates. 
D) adjusting all of the above. 
A) adjusting the cash flows. 
B) adjusting the discount rates. 
C) adjusting both cash flows and discount rates. 
D) adjusting all of the above.

Question 11

Which of the following is NOT an example of political risk?

Accepted Answer

A) Expropriation of cash flows by a foreign government. 
B) The U.S. government restricts trade with a foreign country where your firm has investments. 
C) The foreign government nationalizes all foreign-owned assets. 
D) All of the above are examples of political risk. 
A) Expropriation of cash flows by a foreign government. 
B) The U.S. government restricts trade with a foreign country where your firm has investments. 
C) The foreign government nationalizes all foreign-owned assets. 
D) All of the above are examples of political risk.

Project evaluation from the viewpoint serves some useful purposes and/but should the viewpoint.

Currency risk is a concern for any international merger and acquisition activity. For instance, the initial bid, if denominated in a foreign currency, creates a contingent foreign currency exposure for the bidder.

Refer to Instruction 18.1. What is the initial investment for the Velo Rapid Revolutions project?

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

When determining a firm's weighted average cost of capital (wacc)which of the following terms is NOT necessary?

As opposed to greenfield investment, a cross-border acquisition is typically quicker.

Refer to Instruction 18.1. What are the annual after-tax cash flows for the Velo Rapid Revolutions project?

In international capital budgeting, the appropriate discount rate for determining the present value of the expected cash flows is always the firm's domestic WACC.

When assessing the additional risk that can occur from investing abroad firms may choose to account for risk via:

Which of the following is NOT an example of political risk?

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Working Capital Management

International Trade Finance

Filters

Exam 18: Multinational Capital Budgeting and Cross-Border Acquisitions

Project evaluation from the ________ viewpoint serves some useful purposes and/but should ________ the ________ viewpoint.

Currency risk is a concern for any international merger and acquisition activity. For instance, the initial bid, if denominated in a foreign currency, creates a contingent foreign currency exposure for the bidder.

Refer to Instruction 18.1. What is the initial investment for the Velo Rapid Revolutions project?

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

When determining a firm's weighted average cost of capital (wacc)which of the following terms is NOT necessary?

As opposed to greenfield investment, a cross-border acquisition is typically quicker.

Refer to Instruction 18.1. What are the annual after-tax cash flows for the Velo Rapid Revolutions project?

In international capital budgeting, the appropriate discount rate for determining the present value of the expected cash flows is always the firm's domestic WACC.

When assessing the additional risk that can occur from investing abroad firms may choose to account for risk via:

Which of the following is NOT an example of political risk?

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Working Capital Management

International Trade Finance

Filters

Project evaluation from the viewpoint serves some useful purposes and/but should the viewpoint.