Question

A company believes that interest rates will increase in the near future and stay at higher levels. This company should borrow at a:

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

Question

Should tax-related factors be considered in evaluating a foreign target?

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

Question

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

Qustion

MNCs sometimes measure country risk by assigning weights to factors. Which of the following is correct:

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

Question

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

Question

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:

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

Question

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

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Question 19 2 pts

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With consignments:

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

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Question 20 2 pts Skip to question text.

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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:

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

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Question 21 2 pts

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Which of the following is probably the most difficult for a MNC to value?

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

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Which strategy is suggested when a company wants to to reduce risk by diversifying internationally?

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

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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 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: