Exam 15: International Corporate Governance and Control

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.

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

A simple method of valuing a private company is to apply the price-earnings ratios of publicly traded firms in the same industry to the private company's earnings.

Even if an existing business adds value to an MNC, it may be worthwhile to assess whether the business would generate more value to the MNC if it was restructured.

A foreign target's expected future cash flows generally vary among different MNCs valuing the target.

At present, U.S. firms acquire more targets in the former Soviet Union than in any other country.

An international acquisition will typically require that the acquirer pay a premium of 30 percent or more for a public target.

According to your text, U.S. firms pursue more international acquisitions in ____ than in other countries.

An acquirer based in a low-tax country may be able to generate higher cash flows from acquiring a foreign target than an acquirer based in a high-tax country.

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.

The stock price of a target may decrease if investors anticipate that the target will be acquired, since they are aware that stock prices of targets fall abruptly after a bid by the acquiring firm.

Potential targets in countries where economic conditions are ____ are more likely to experience strong demand for their products in the future and may generate ____ cash flows.

If an MNC targets a successful foreign company with plans to continue the target's local business in a more efficient manner, the risk of the business will be relatively ____, and therefore the MNC's required return from acquiring the target will be relatively ____.

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.

Which of the following is not true regarding a target's previous cash flows?

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

The valuation of newly privatized businesses is generally more difficult than the valuation of a foreign target that has operated privately for several years.

Which of the following tax-related factors need not be considered in assessing a foreign target?

If a target is privately held, general stock market conditions will not affect the amount that an acquirer has to pay for a foreign target.

Exhibit 15-1 Klimewsky, Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Klimewsky would like you to value this target and has provided you with the following information: -Refer to Exhibit 15-1. The Malaysian target's value based on its stock price is $____ million.