Exam 19: International Managerial Finance

The transfer of capital, managerial, and technical assets by a multinational firm from its home country to a foreign country is termed ________.

Economic exposure is the risk resulting from the effects of changes in foreign exchange rates on a firm's value.

________ is an international body that polices world commercial trading practices and mediates disputes among two or more member countries.

________ is a treaty that has governed world trade throughout most of the post World War II era.

Comprehensive rules, regulations, and incentives aimed at regulating the inflow of direct foreign investments involving MNCs and at extracting more benefits from their presence are termed as ________.

The Euromarket is the international financial market that provides for borrowing and lending currencies outside their country of origin.

The Mercosur is a major European trading bloc that includes former Soviet bloc countries in Eastern Europe.

Relative to cash flows of domestic firms, by diversifying internationally, multinationals ________.

The all-current-rate method is the method by which the functional currency-denominated financial statements of an MNC's subsidiary are translated into the parent company's currency.

International short-term financing opportunities are available in ________.

A joint venture is a partnership under which the participants have contractually agreed to contribute specified amounts of money and expertise in exchange for stated proportions of ownership and profit.

Exchange rate risk hedging tools include Monte Carlo swaps, synthetic insurance contracts, and inventory swaps.

In capital budgeting for a multinational company, the starting discount rate to which risks stemming from foreign exchange and political factors can be added, and from which benefits reflecting the parent's lower capital costs may be subtracted is ________.

For a Eurodollar bond, the interest rate will reflect several different rates, most notably the U.S. long-term rate, the Eurodollar rate, and long-term rates in other countries.

A bond that is sold primarily in countries other than the country of the currency in which the issue is denominated is called ________.

An international bond that is sold primarily in countries other than the country of the currency in which the issue is denominated is called ________.

Which of the following factors can influence the operations of an MNC?

Self-sustaining foreign entity operates independent of the parent multinational and the current-rate method is the primary approach for translation of individual accounts.

FASB No. 52 is a statement issued by the Financial Accounting Standards Board requiring American MNCs to first convert the financial statement accounts of foreign subsidiaries into the country's functional currency and then translate the accounts into the parent firm's currency using the ________ method.

A U.S.-based MNC has three subsidiaries: S1 (40 percent owned by the MNC); S2 (33 percent owned by S1), and S3 (20 percent owned by S2). The taxable income for each firm is $100 million. The local taxes for each firm are $15 million, $20 million, and $10 million, respectively. The MNC's tax rate is 40 percent. (a) Can the MNC apply all of its local taxes as a credit against its U.S. taxes? (b) Based on the "grossing up" concept, calculate all tax credits applicable to the MNC.