Info
Warning
Danger

Study Resources (Business Management)

  31) Domestic tax neutrality means that A) a dollar earned anywhere in the world by a U.S. corporation is taxed the same as if earned in the U.S. B) tax rates are neither regressive nor progressive. C) foreign affiliates must neutralize their income by subtraction of foreign investment credits. D) all of the above.   32).
3 Views
View Answer
  2.3   Fixed versus Flexible Exchange Rates   1) The global recession of 2009/2010 saw the major global economic players (USA, China, and Europe) each choose the same international currency goals from the "impossible trinity". Meaning each felt an independent monetary policy was the most important goal followed by free movement of capital,.
2 Views
View Answer
  Essay Questions   13.2   Optimal Financial Structure   1) Optimal capital structure in a domestic market is determined by many factors. Is there a single best debt ratio for a firm. If so, what is it? Does there appear to be a range for optimal capital structure for U.S. firms? If so, what is.
5 Views
View Answer
  7) Empirical evidence shows that new issues of equity by domestic firms in the U.S. market typically has a ________ stock price reaction and new equity issues in the U.S. markets by foreign firms with segmented domestic markets have a ________ stock price reaction. A) negative; negative B) positive; negative C) negative; positive D).
2 Views
View Answer
  Multiple Choice and True/False Questions   15.1   The Trade Relationship   1) The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an A) unaffiliated known. B) affiliated party. C) unaffiliated unknown. D) any of the above.   2) Which of the following relationships between importing and exporting parties.
10 Views
View Answer
  16.4   How to Invest Abroad: Modes of Foreign Involvement   1) Joint ventures have significant advantages as well several disadvantages versus a wholly owned subsidiary with regard to investment abroad. Define the two types of investment opportunities and provide a comprehensive list of the advantages and disadvantages for the joint venture form.
4 Views
View Answer
  Multiple Choice and True/False Questions   16.1   Sustaining and Transferring Competitive Advantage   1) An example of economies of scale in financing includes A) being able to access the Euroequity, Eurobond, and Eurocurrency markets. B) being able to ship product in shiploads or carloads. C) being able to use large-scale plant and equipment. D) all of the above.   16.2  .
4 Views
View Answer
  11) Level II ADRs must meet A) U.S. GAAP standards. B) home country accounting standards. C) both U.S. GAAP and home country standards. D) none of the above.   12) An unsponsored ADR may be initiated without the approval of the foreign firm with the underlying stock.   13) Level ________ is the easiest standard to satisfy for.
3 Views
View Answer
  13.3   Optimal Financial Structure and the MNE   1) The domestic theory of optimal capital structure does not need to be modified for MNEs.   2) In theory, a MNE should support ________ debt ratios than a purely domestic firm because their cash flows are ________. A) lower; more stable due to international diversification B).
2 Views
View Answer
  21) A banker's acceptance is a ________ that has been accepted by a bank. A) credit certificate B) time draft C) line of credit D) bill of lading   22) The draft is the instrument normally used in international commerce to A) transfer product. B) prove ownership. C) transfer title. D) initiate the sale. 23) The ________ is the instrument normally.
3 Views
View Answer
  Multiple Choice and True/False Questions   17.1   Complexities of Budgeting for a Foreign Project   1) The traditional financial analysis applied to foreign or domestic projects, to determine the project's value to the firm is called A) cost of capital analysis. B) capital budgeting. C) capital structure analysis. D) agency theory.   2) Which of the following is NOT.
7 Views
View Answer
  Multiple Choice and True/False Questions   14.1   Tax Principles   1) The primary objective of multinational tax planning is to minimize the firm's worldwide tax burden.   2) The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries.
8 Views
View Answer
  13.8   Raising Debt Globally   1) ________ are domestic currencies of one country on deposit in a second country. A) LIBORs B) Eurocurrencies C) Federal funds D) Discount window deposits   2) An Irish company strategy to diversify its capital structure can be A) issuing Eurobond denominated in US dollars. B) issuing a Yankee Bond. C) private placement in USA. D) all.
5 Views
View Answer
  17.3   Illustrative Case: Cemex Enters Indonesia   1) Given a current spot rate of 8.10 Norwegian krone per U.S. dollar, expected inflation rates of 6% in Norway and 3% per annum in the U.S., use the formula for relative purchasing power parity to estimate the one-year spot rate of krone per dollar. A).
5 Views
View Answer
  2) There is much debate about whether an MNE should consider individual country norms, known as localization, when attempting to optimize the consolidated capital structure and minimize the firm's cost of capital. Provide arguments for the advantages and disadvantages of localization of capital structure for subsidiaries. Do you think MNEs.
1 Views
View Answer
  16.6   Firm Specific Political Risk: Governance Risk   1) Potential strategies to mitigate the risk of expropriation and amendments in the investment agreement include A) obtaining insurance from OPIC against country risk. B) thin equity injection supplemented with large local debt. C) using International Finance Institutions loans or co-investment vehicles. D) all of the above   2) ________.
1 Views
View Answer
  14.3   Tax Management at Trident   1) Trident Germany paid 28% corporate income tax and declared dividend to its US parent. The corporate tax rate in US is 35%. A) Dividends remitted to US parent result in excess foreign tax credit B) Dividends remitted to US parent result in deficit foreign tax credit. C).
1 Views
View Answer
  13.4   Raising Equity Globally   1) Transaction costs for trading equity securities as measured by the bid-ask spreads are lowest on which exchange? A) NYSE B) Nasdaq C) London D) Tokyo 2) Depositary receipts traded outside the United States are called ________ depositary receipts. A) Euro B) Global C) American D) None of the above   3) ________ are negotiable certificates issued by.
1 Views
View Answer
  11) Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods? A) widely divergent national monetary and fiscal policies among member nations B) differential rates of inflation across member nations C) several unexpected economic shocks to member nations D) all of the above   12).
6 Views
View Answer
  2.2   IMF Classification of Currency Regimes   1) The IMFs exchange rate regime classification identifies ________ as the most rigidly fixed, and ________ as the least fixed. A) exchange arrangements with no separate legal tender; independent floating B) crawling pegs; managed float C) currency board arrangements; independent floating D) pegged exchange rates within horizontal bands; exchange.
2 Views
View Answer
  17.4   Project Financing   1) Project financing is the arrangement of financing for very large individual long-term capital projects.   2) Which of the following is NOT a factor critical to the success of project financing? A) separability of the project from its investors B) long-lived and capital intensive singular projects C) cash flow predictability from third.
2 Views
View Answer
  Essay Questions   17.1   Complexities of Budgeting for a Foreign Project   1) Explain how political risk and exchange rate risk increase the uncertainty of international projects for the purpose of capital budgeting.   17.2   Project versus Parent Valuation   1) The authors highlight a strong theoretical argument in favor of analyzing any foreign project from the viewpoint.
1 Views
View Answer
  15.3   Key Documents   1) A signed ________ is issued by the exporter and contains a precise description of the merchandise. A) packing list B) bill of lading C) commercial invoice D) banker's acceptance   2) The main disadvantage of the Letter of Credit (L/C) is A) L/C reduces counterparty and foreign exchange risk. B) L/C can serve as collateral.
1 Views
View Answer
  17) When estimating a firm's cost of equity capital using the CAPM, you need to estimate A) the risk-free rate of return. B) the expected return on the market portfolio. C) the firm's beta. D) all of the above.   18) Calculate the cost of equity for Boston Industries using the following information: The cost of.
2 Views
View Answer
  15.3   Key Documents   1) Explain what a letter of credit (L/C) is, who the principle parties are, what the principle advantage is, and how the L/C facilitates international trade.   2) What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?       .
3 Views
View Answer
  9) A ________ is a shared ownership in a foreign business. A) licensing agreement B) greenfield investment C) joint venture D) wholly-owned affiliate   10) Which of the following is NOT an advantage to a joint venture? A) There is possible loss of opportunity to enter the foreign market with FDI later. B) The local partner understands the.
5 Views
View Answer
  TABLE 17.1 Use the information to answer the following question(s).   Jensen Aquatics Inc., which manufactures and sells scuba gear worldwide, is considering an investment in either Europe or Great Britain. Consider the following cash flows for each project, assume a 12% wacc, and consider these to be average risk projects for the.
2 Views
View Answer
  14.2   Transfer Pricing   TABLE 14.1 Uses the information to answer the following question(s).   MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions.     1) Refer to Table 14.1. If MetroCity pays out 50% of.
1 Views
View Answer
  17.3   Illustrative Case: Cemex Enters Indonesia   1) Capital budgeting typically requires some type of sensitivity analysis. In the case of international capital budgeting from the project perspective, analysts consider political risk, foreign exchange risk and foreign exchange risk. Identify and discuss the important aspects of these two types of risk considerations. 17.4  .
4 Views
View Answer
  13.6   Private Placement   1) Which of the following were NOT identified by the authors as an alternative instrument to source equity in global markets? A) sale of a directed public share issue to investors in a target market B) private placements under SEC rule 144a C) sale of shares to private equity funds D) all.
2 Views
View Answer
  Instruction 17.1: Use the information for the following question(s).   The Wheel Deal Inc., a company that produces scooters and other wheeled non-motorized recreational equipment is considering an expansion of their product line to Europe. The expansion would require a purchase of equipment with a price of euro 1,200,000 and additional installation of.
2 Views
View Answer
11) The territorial approach to taxation policy is also termed the ________ approach. A) source B) ethical C) greedy D) location   12) Tax treaties generally have the effect of increasing the withholding taxes between the countries that are negotiating the treaties.   13) Typical result of a tax treaty between two countries is A) decreased level of business.
5 Views
View Answer
  15.4   Documentation in a Typical Trade Transaction   1) ________ drafts are unaccompanied by any other documents, and are usually used between MNEs and ________. A) Clean; new trading partners B) Documentary; their own affiliates C) Clean; their own affiliates D) None of the above   2) Most drafts in international trade are "clean."   3) Drafts that have been.
3 Views
View Answer
  16.7   Country Specific Risk: Transfer Risk   1) ________ risks are those that affect the MNE at the local or project level, and originate at the country level. A) Country-specific B) Firm-specific C) Global-specific D) None of the above   2) A country can react to the potential for blocked funds prior to making an investment, during operations,.
2 Views
View Answer
  13.7   Foreign Equity Listing and Issuance   1) By cross-listing and selling its shares on a foreign stock exchange a firm typically tries to accomplish one or more objectives. List and briefly explain each of the five objectives identified by your authors.   2) How does market segmentation impact the effect on share prices.
1 Views
View Answer
  3) What are the two schools of thought regarding the worldwide trend toward increased financial disclosure by publicly traded firms. Explain which school of thought you hold to and why.   13.8   Raising Debt Globally   1) The Euro-medium-term-note (EMTN) has filled a substantial niche market in global financing. What are the distinguishing characteristics.
1 Views
View Answer
  Multiple Choice and True/False Questions   2.1   History of the International Monetary System   1) Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange.
9 Views
View Answer
  Essay Questions   16.1   Sustaining and Transferring Competitive Advantage   1) What does the OLI Paradigm propose to explain? Define each component and provide an example of each.   16.3   Deciding Where to Invest   1) Identify and define the two behavioral theories of Foreign Direct Investment as identified by the authors.       .
2 Views
View Answer
  Multiple Choice and True/False Questions   13.1   Designing a Strategy to Source Capital Globally   1) The choice of when and how to source equity globally is usually aided early on by the advice of A) an investment banker. B) your stock broker. C) a commercial banker. D) the internal revenue service.   2) Investment banking services include which of.
9 Views
View Answer
  15.6   Trade Financing Alternatives   1) Which of the following is NOT a factor in the discounting of a securitized export receivable? A) the cost of credit insurance B) the historic collection risk of the importer C) the historic collection risk of the exporter D) the size of the financing and service fees   2) By obtaining export.
3 Views
View Answer
  16.3   Deciding Where to Invest   1) Which of the following is NOT true regarding behavioral observations of firms making a decision to invest internationally? A) MNEs initially invest in countries with a similar "national psychic." B) Firms eventually take greater risks in terms of the national psychic of countries in which they invest. C).
2 Views
View Answer
    15.5   Government Programs to Help Finance Exports   1) What is the Import-Export Bank and how can it aid in export financing?   15.6   Trade Financing Alternatives   1) Define and describe the process of factoring. When might this process be attractive to firms?     1) Forfaiting is a complicated process. The author describes the procedure through a.
4 Views
View Answer
  Essay Questions   15.1   The Trade Relationship   1) The nature of the relationship between the exporter and the importer is critical to understanding the methods for import-export financing utilized in industry. Provide an overview of the three categories of relationships: unaffiliated unknown, unaffiliated known, and affiliated. 15.2   Benefits of the System   1) What is.
2 Views
View Answer
    12.3   The Demand for Foreign Securities: The Role of International Portfolio Investors   1) What motivates portfolio investors to purchase and hold foreign securities in their portfolio?   12.4   The Cost of Capital for MNEs Compared to Domestic Firms   1) What are the components of the weighted average cost of capital (WACC) and how do.
4 Views
View Answer
  16.5   Predicting Political Risk   1) Which of the following is NOT an example of a country-specific risk? A) transfer risk B) war and ethnic strife C) cultural and religious heritage D) All of the above are examples of country-specific risk.   2) Of the following, which would NOT be considered a firm-specific risk? A) the risk of getting.
2 Views
View Answer