Question 1

The sale of a subsidiary by an MNC is referred to as a divestiture.

Accepted Answer

A) True 
 B)False

Question 2

An international alliance typically requires a ____ initial outlay than an international acquisition, and the cash flows to be received will typically be ____ than the cash flow resulting from an international acquisition.

Accepted Answer

A)  smaller; larger 
B)  smaller; smaller 
C)  larger; smaller 
D)  larger; larger 
A)  smaller; larger 
B)  smaller; smaller 
C)  larger; smaller 
D)  larger; larger

Question 3

Which of the following factors is least likely to cause the required rate of return to vary among MNCs assessing the same foreign target?

Accepted Answer

A)  differences in the timing of remittances from the target to the parent. 
B)  differences in the desired use of the target. 
C)  differences in the local risk-free interest rate. 
D)  differences in the ability to use financial leverage. 
A)  differences in the timing of remittances from the target to the parent. 
B)  differences in the desired use of the target. 
C)  differences in the local risk-free interest rate. 
D)  differences in the ability to use financial leverage.

Question 4

The Sarbanes-Oxley Act requires more accountability by executives and the board of directors when assessing acquisitions.

Accepted Answer

A) True 
 B)False

Question 5

An international acquisition is different from the establishment of a new subsidiary in that the MNC can immediately expand its international business since the target is already in place.

Accepted Answer

A) True 
 B)False

Question 6

As far as the managerial talent of the target is concerned:

Accepted Answer

A)  the manner in which the acquirer plans to deal with the managerial talent will affect the estimated cash flows to be generated by the target. 
B)  downsizing will reduce expenses and increase productivity and revenues. 
C)  governments of some countries are likely to intervene and prevent the acquisition if downsizing is anticipated. 
D)  all of the above 
E)  A and C only 
A)  the manner in which the acquirer plans to deal with the managerial talent will affect the estimated cash flows to be generated by the target. 
B)  downsizing will reduce expenses and increase productivity and revenues. 
C)  governments of some countries are likely to intervene and prevent the acquisition if downsizing is anticipated. 
D)  all of the above 
E)  A and C only

Question 7

Which of the following is not an advantage of international acquisitions over the establishment of a new subsidiary?

Accepted Answer

A)  The firm can immediately expand its international business. 
B)  The firm benefits from existing customer relationships. 
C)  International acquisitions are generally cheaper than the establishment of a new subsidiary. 
D)  An international acquisition typically generates quicker and larger cash flows than the establishment of a new subsidiary. 
E)  All of the above are advantages of international acquisitions. 
A)  The firm can immediately expand its international business. 
B)  The firm benefits from existing customer relationships. 
C)  International acquisitions are generally cheaper than the establishment of a new subsidiary. 
D)  An international acquisition typically generates quicker and larger cash flows than the establishment of a new subsidiary. 
E)  All of the above are advantages of international acquisitions.

Question 8

When an MNC assesses targets among countries, it would prefer a country in which the growth potential for its respective industry is high and the competition within the industry is not excessive.

Accepted Answer

A) True 
 B)False

Question 9

When an MNC assesses targets among countries, it would prefer a country where the growth potential for its industry is ____ and the competition within the industry is ____.

Accepted Answer

A)  low; not excessive 
B)  high; excessive 
C)  high; not excessive 
D)  low; excessive 
A)  low; not excessive 
B)  high; excessive 
C)  high; not excessive 
D)  low; excessive

Question 10

Which of the following is not a reason why the valuation of a foreign target may vary among MNCs?

Accepted Answer

A)  Differences in estimated cash flows to be generated by the foreign target 
B)  Differences in estimated exchange rates 
C)  Differences in required rates of return 
D)  All of the above are possible reasons why the valuation of a foreign target may vary among MNCs 
A)  Differences in estimated cash flows to be generated by the foreign target 
B)  Differences in estimated exchange rates 
C)  Differences in required rates of return 
D)  All of the above are possible reasons why the valuation of a foreign target may vary among MNCs

Question 11

An MNC that plans to acquire a target would prefer to time its bid for the target when the local stock market prices in the target's country are generally high.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following types of international corporate control transaction is probably the most difficult to value by an MNC?

Accepted Answer

A)  international acquisition. 
B)  newly privatized foreign business. 
C)  international alliance. 
D)  international divestiture. 
A)  international acquisition. 
B)  newly privatized foreign business. 
C)  international alliance. 
D)  international divestiture.

Question 13

Based on information in your text, all of the following factors should be considered in an international acquisition, except:

Accepted Answer

A)  the target's willingness to be acquired. 
B)  the target's previous acquisition history. 
C)  the target's previous cash flows. 
D)  the target's local economic conditions. 
A)  the target's willingness to be acquired. 
B)  the target's previous acquisition history. 
C)  the target's previous cash flows. 
D)  the target's local economic conditions.

Question 14

Privatization involves the sale of previously government-owned businesses by the government.

Accepted Answer

A) True 
 B)False

Question 15

An international acquisition may be preferable to the establishment of a new subsidiary because the firm can immediately expand its international business and benefit from existing customer relationships.

Accepted Answer

A) True 
 B)False

Question 16

The initial outlay for a project in a foreign country may decline if property values in that country decline.

Accepted Answer

A) True 
 B)False

Question 17

If potential acquirers are based in different countries, their required rates of return when considering a specific target will only vary if the desired use of the target is different.

Accepted Answer

A) True 
 B)False

Question 18

Downsizing reduces expenses but may also reduce productivity and revenue.

Accepted Answer

A) True 
 B)False

Question 19

An MNC that plans to acquire a target would prefer to make a bid at a time when the local stock market prices are generally ____. Assume that economic conditions are held constant when completing this statement.

Accepted Answer

A)  low 
B)  high 
C)  volatile 
D)  none of the above 
A)  low 
B)  high 
C)  volatile 
D)  none of the above

Question 20

It is always the best course of action to divest of a foreign project if the expected cash flows from the project decline substantially.

Accepted Answer

A) True 
 B)False

Exam 15: International Corporate Governance and Control

The sale of a subsidiary by an MNC is referred to as a divestiture.

An international alliance typically requires a ____ initial outlay than an international acquisition, and the cash flows to be received will typically be ____ than the cash flow resulting from an international acquisition.

Which of the following factors is least likely to cause the required rate of return to vary among MNCs assessing the same foreign target?

The Sarbanes-Oxley Act requires more accountability by executives and the board of directors when assessing acquisitions.

An international acquisition is different from the establishment of a new subsidiary in that the MNC can immediately expand its international business since the target is already in place.

As far as the managerial talent of the target is concerned:

Which of the following is not an advantage of international acquisitions over the establishment of a new subsidiary?

When an MNC assesses targets among countries, it would prefer a country in which the growth potential for its respective industry is high and the competition within the industry is not excessive.

When an MNC assesses targets among countries, it would prefer a country where the growth potential for its industry is ____ and the competition within the industry is ____.

Which of the following is not a reason why the valuation of a foreign target may vary among MNCs?

An MNC that plans to acquire a target would prefer to time its bid for the target when the local stock market prices in the target's country are generally high.

Which of the following types of international corporate control transaction is probably the most difficult to value by an MNC?

Based on information in your text, all of the following factors should be considered in an international acquisition, except:

Privatization involves the sale of previously government-owned businesses by the government.

An international acquisition may be preferable to the establishment of a new subsidiary because the firm can immediately expand its international business and benefit from existing customer relationships.

The initial outlay for a project in a foreign country may decline if property values in that country decline.

If potential acquirers are based in different countries, their required rates of return when considering a specific target will only vary if the desired use of the target is different.

Downsizing reduces expenses but may also reduce productivity and revenue.

An MNC that plans to acquire a target would prefer to make a bid at a time when the local stock market prices are generally ____. Assume that economic conditions are held constant when completing this statement.

It is always the best course of action to divest of a foreign project if the expected cash flows from the project decline substantially.

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

An international alliance typically requires a initial outlay than an international acquisition, and the cash flows to be received will typically be than the cash flow resulting from an international acquisition.

When an MNC assesses targets among countries, it would prefer a country where the growth potential for its industry is and the competition within the industry is .