MADCO, a U.S. company, exports to other countries. The company sells its accounts receivable without recourse. Factoring involves: purchase of accounts receivable by a factor accounts payable financing working capital financing countertrade none of the above Flag this Question Question 6 2 pts A MNC could do which of the following to make it desirable to the host government: use local employees for managerial positions purchase supplies in the host country Reinvest profits in the host country all of the above none of the above Flag this Question Question 7 2 pts A MNC might establish a manufacturing facility in a foreign country because: labor costs are lower tax rates are lower the host government offers incentives expenses are lower all of the above Flag this Question Question 8 2 pts MNCs who want to retain liquidity may invest excess cash in: international equity markets international bond markets international medium-term debt markets international money markets all of the above Flag this Question Question 9 2 pts A method of payment that is an unconditional promise by one party, instructing the buyer to pay the face amount upon presentation is a: banker's acceptance trade acceptance letter of credit bill of lading none of the above Flag this Question Question 10 2 pts Assume a Canadian firm initiates direct foreign investment in the U.S. The Canadian dollar is expected to depreciate against the U.S. dollar. The C$ dollar value of earnings remitted to the parent Canadian company should: decrease because the U.S. dollar will buy more Canadian dollars decrease because the U.S. dollar will buy fewer Canadian dollars increase because the U.S. dollar will buy more Canadian dollars increase because the U.S. dollar will buy fewer Canadian dollars none of the above Flag this Question Question 11 2 pts A banker's acceptance: provides short-term financing for the importer, but is not beneficial to the exporter can be sold in the money market at a discount can be sold in the money market at a premium cannot be sold in the money market none of the above Flag this Question Question 12 2 pts A company believes that interest rates will increase in the near future and stay at higher levels. This company should borrow at a: floating rate, because it will result in lower financing costs fixed rate, because it will result in lower financing costs floating rate, because the rate may go down, but not up fixed rate, because the rate can only increase after 2 years none of the above Flag this Question Question 13 2 pts Should tax-related factors be considered in evaluating a foreign target? yes, different tax rates may increase after-tax earnings no, corporate tax rates in the home country and the foreign country are the same no, foreign taxes can be deducted from home country taxes yes, corporate tax rates in the home country are always higher. none of the above Flag this Question Question 14 2 pts Counterpurchase: is a form of barter involves two separate transactions always involves governments and MNCs is not a form of countertrade none of the above Flag this Question Question 15 2 pts MNCs sometimes measure country risk by assigning weights to factors. Which of the following is correct: weights should be equally allocated among factors factors will be identical for all MNCs conducting business in the same country Factors for political and financial risk will be equally weighed in the final analysis weights should be assigned to factors for political and financial risk according to their perceived importance. none of the above Flag this Question Question 16 2 pts The Export-Import Bank of the U.S. offers various programs, including: medium-term guarantee program bank insurance programs for exporters export credit insurance program for exporters working capital guarantee program All of the above Flag this Question Question 17 2 pts A U.S. MNC is considering investing in Portuguese securities. The exchange rate is = $1.33. If the euro depreciates, the effective yield on the investment will be: higher, because the euro will convert to fewer dollars lower, because the euro will convert to fewer dollars higher, because the dollar will convert to fewer euros lower, because the dollar will convert to more euros lower, because the dollar will convert to more euros Flag this Question Question 18 2 pts Spain and South Africa have very different economic conditions. A MNC would reduce risk by: operating in both countries operating in Spain, but not South Africa operating in South Africa, but not Spain operating in neither country none of the above Flag this Question Question 19 2 pts With consignments: the exporter ships the goods to the importer along with the title to the goods The importer pays the exporter as soon as the goods are received The importer pays the exporter when the goods are sold The exporter and importer assume equal risk none of the above Flag this Question Question 20 2 pts MORIT, Inc., a U.S. corporation undertakes direct foreign investment in Brazil. The Brazilian real is expected to depreciate temporarily against the dollar. As a result, earnings remitted to MORIT will convert to fewer dollars. For this reason, MORIT may request the subsidiary to: postpone remitting earnings until the dollar strengthens postpone remitting earnings until the real strengthens remit earnings right away before the dollar weakens all of the above none of the above Flag this Question Question 21 2 pts Which of the following is probably the most difficult for a MNC to value? international acquisition international divestiture international partial acquisition newly privatized foreign business none of the above Flag this Question Question 22 2 pts Which strategy is suggested when a company wants to to reduce risk by diversifying internationally? Establish subsidiaries in markets whose business cycles differ from those where existing subsidiaries are based Establish subsidiaries in markets that have relatively low cost of labor or land Establish subsidiaries in markets where the local currency is weak but is expected to appreciate over time Establish subsidiaries in markets whose business cycles are the same as those where existing subsidiaries are based none of the above Flag this Question Question 23 2 pts The Jackson Corporation, a U.S. firm, establishes a subsidiary in a foreign country where it currently doesn't do any business. The present value of cash flows from this subsidiary to the parent is more sensitive to exchange rate movements when: the parent finances most of the investment. the parent finances the entire investment. the subsidiary finances the entire investment by local borrowing. the subsidiary finances most of the investment by local borrowing. none of the above Flag this Question Question 24 2 pts MNCs may value the same foreign target company in different ways because of: Differences in tax rates Differences in estimated exchange rates Differences in required rates of return all of the above none of the above Flag this Question Question 25 2 pts Financial characteristics that should be considering in evaluating country risk include: interest rates exchange rates inflation government fiscal policy all of the above Flag this Question Question 26 5 pts The annual interest rate on the Canadian dollar is 9%. The forecast of the Canadian dollar's value for the next year is shown below. Calculate the effective financing rate for a U.S. company. Show how you derive the answer. Percentage Change Probability 1.0% 15% -1.5% 30% -2.0% 55% HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 27 5 pts The annual interest rate on the Swiss franc is 4%. It is expected to appreciate 3% over the next year. Calculate the effective financing rate for a U.S. company. Show how you derive the answer. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 28 5 pts Tundra, Inc. plans to make an offer for a Chinese company. The Chinese company has 50 million shares outstanding and price per share is 3 yuan. The current spot exchange rate is $1 = 6.27yuan and the estimated spot rate at the end of 6 months is 6.24. (1) Calculate the Chinese company's value in dollars based on its stock price; and (2) Calculate the value in dollars if the estimated spot rate at the end of 6 months is used? Show how you derive answers. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 29 5 pts Boxton, Inc. is considering a project with an estimated return on 10%. Its capital structure consists of 60% debt and 40% equity. Its borrowing rate is 6% and cost of equity is 10%. Its tax rate is 30%. (1) Calculate Boxton's weighted averaged cost of capital. Show how you derive the answer); and (2) should Boxton undertake the project? Why or why not? HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 30 5 pts Parvis, Inc., a U.S. Company is expecting cash flows in Australian dollars of: A$1 million, AS1.5 million, and AS .5 million in years 1, 2, and 3, respectively. The forecasted exchange rates are US$1.03 year 1, US$1.04 year 2, and US$1.05 year 3. (1) Calculate the US dollar value of the cash flows by year; and (2) the total cash flow for the 3 years. Show how you derive answers. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 31 5 pts Company X has a beta of .85, the risk-free rate of return is 1%, and the average return on the market is 9%. (1) Calculate the required rate of return on Company X's stock. Show how you derive the answer. (2) Does Company X's stock have greater risk, the same risk, or less risk than the average stock? Explain. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 32 5 pts The 1-year interest rate is 7% in the U.S. and 3% in Japan. How much would the yen have to appreciate for a U.S. investor to get the same return on both U.S. and Japanese investments? Show you derive the answer. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 33 5 pts MLC Audio has decided to issue 3-year bonds denominated in 10 million Singapore dollars. The bonds have a coupon rate of 10%. The Singapore dollar is expected to appreciate from its current level of $.82 to $.80, $.79, and $.78 in years 1, 2, and 3, respectively. Calculate the financing cost (in percent) of these bonds. Show how you derive the answer. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 34 5 pts Marcus, Inc., a U.S. company takes out a 1-year loan in Germany. The U.S. 1-year interest rate is 5%, and the German 1-year interest rate is 6%. The spot rate of the euro is $1.33 and the 1-year forward rate is $1.29. Calculate the effective financing rate for Marcus. Show how you derive the answer. HTML Editor Keyboard Shortcuts Font Sizes Paragraph p Flag this Question Question 35 5 pts A U.S. company is considering a project in Mexico. Estimated cash flows are 10 million Mexican pesos the first year and 20 million Mexican pesos the second year. The U.S. company would incur a cost of $2 million at the start of the project, and its cost of capital is 12%. The expected spot rate is $0.13 for Year 1 and $0.11 for Year 2. (1)Calculate the net present value of this project . Show how you derive the answer; and (2) Should the U.S. company invest in the project? Why or why not? Show all work for the problems.