Exam 13: Direct Foreign Investment

Countries in eastern Europe are more appealing to MNCs that seek relatively low costs of land and labor than countries in western Europe.

Consider a country that presently has a high level of unemployment because of weak economic conditions. Its income levels are very low. This country may be an attractive target as a result of ____ motives by U.S. firms that engage in direct foreign investment.

Some governments restrict foreign ownership of local firms. Such restrictions may limit or prevent international acquisitions.

MNCs can probably achieve more desirable risk-return characteristics from their project portfolios if they sufficiently diversify among products and geographical markets.

The ____ the correlation in project returns is over time, the ____ will be the project portfolio risk as measured by the portfolio variance.

When economic conditions of two countries are ____, then a firm would ____ its risk by operating in both countries instead of concentrating just in one.

The best means of using direct foreign investment (DFI) to fully benefit from cheap foreign factors of production is probably to:

Direct foreign investment (DFI) represents investment in real assets (such as land, buildings, or even existing plants) in foreign countries.

When a firm perceives that a foreign currency is ____, the firm may attempt direct foreign investment in that country, as the initial outlay should be relatively ____.

Direct foreign investment is perceived by foreign governments to:

____ is not a revenue-related motive for direct foreign investment.

To fully benefit from use of foreign raw materials:

If countries are highly influential upon each other, the correlations of their economic growth levels would likely be ____. A firm would benefit ____ by diversifying sales among these countries relative to another set of countries that were not influential upon each other.

Assume a U.S. firm initiates direct foreign investment in Italy. If the euro is expected to depreciate against the dollar, the dollar value of earnings remitted to the parent should ____. The parent may request that the subsidiary ____.

The ____ a project's variability in cash flows, and the ____ the positive correlation between the project's cash flow and the MNC's cash flow, the lower the risk of the project.

Direct foreign investment is normally completed first, and then capital budgeting can be applied later.

Constraints pertaining to taxes, currency convertibility, earnings remittance, and employee rights are best described as:

To exploit monopolistic advantages, an MNC should:

Developing countries are mostly targeted because they have advanced technology.

When a foreign currency is perceived by a firm to be ____, the firm will probably ____ direct foreign investment in that country.