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

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

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

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

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

Financial characteristics that should be considering in evaluating country risk include:

interest rates

exchange rate

inflation

government fiscal policy

all of the above