INTERNATIONAL FINANCIAL
MANAGEMENT MADURA FOURTEENTH
EDITION STUDY GUIDE ALL CHAPTERS
2026 QUESTIONS ANSWERS GRADED A+
⩥Benefits of a multilateral netting system include
- the decrease in the expense associated with funds transfer, which in
some cases can be over $1,000 for a large international transfer of
foreign exchange.
- the benefits that accrue from the establishment of a formal information
system, which serves as the foundation for centrally managing
transaction exposure and the investment of excess funds.
- all of the options
- the reduction in intra-company float, which is frequently as high as five
days even for wire transfers.
- the reduction in the number of foreign exchange transactions and the
associated cost of making fewer but larger transactions.
Answer: all of the options
⩥Which one of the following is a false statement when engaged in
bilateral netting?
Answer: Total interaffiliate receipts need not always equal total
interaffiliate disbursements.
,⩥True or False: A netting center necessarily implies that the MNC has a
central cash manager.
Answer: false
⩥Which of the following statements about multilateral netting system
are correct?
(i) Each affiliate nets all its interaffiliate receipts against all its
disbursements.
(ii) Each affiliate transfers or receives a balance, depending on whether
it is a net payer or receiver.
(iii) The net funds to be received by the affiliates will equal the net
disbursements to be made by the affiliates.
(iv) Only two foreign exchange transactions are necessary since the
affiliates' net receipts will always be equal to zero.
(v) Only two foreign exchange transactions are necessary since the
affiliates' net disbursements will always be equal to zero..
Answer: I, II, and III
⩥True or False: A central cash manager has a global view of the most
favorable borrowing rates and most advantageous investment rates..
Answer: True
,⩥Good cash management encompasses.
Answer: investing excess funds at the most favorable interest rate and
borrowing at the lowest rate when there is a temporary cash shortage.
⩥Your firm's interaffiliate cash receipts and disbursements matrix is
shown here ($000):
Disbursements ReceiptsU.S.CanadaGermanyU.K.Total ReceiptsU.S.
10151540Canada10 101030Germany55 515U.K.202020 60Total
Disbursements35354530
Find the net cash flow in (out of) the U.S. affiliate..
Answer: $5,000 in
⩥A firm keeps a precautionary cash balance to cover unexpected
transactions during the budget period. The size of this balance depends
on how safe the firm desires to be in its ability to meet unexpected
transactions..
Answer: The larger the precautionary cash balance, the greater the
potential opportunity cost.
The larger the precautionary cash balance, the less is the risk of financial
embarrassment and loss of credit standing.
The larger the precautionary cash balance, the greater is the firm's ability
to meet unexpected expenses.
, ⩥As of today, the spot exchange rate is €1.00 = $1.25 and the rates of
inflation expected to prevail for the next year in the U.S. is 2 percent and
3 percent in the euro zone. What is the one-year forward rate that should
prevail?.
Answer: €1.00 = $1.2379
⩥The firm's tax rate is 34 percent. The firm's pre-tax cost of debt is 8
percent; the firm's debt-to-equity ratio is 3; the risk-free rate is 3 percent;
the beta of the firm's common stock is 1.5; the market risk premium is 9
percent. Calculate the weighted average cost of capital..
Answer: 8.09 percent
⩥In the context of the capital budgeting analysis of an MNC that has
strong foreign competitors, "lost sales" refers to.
Answer: the entire sales revenue of a new foreign manufacturing facility
representing the incremental sales revenue of the new project, the
cannibalization of existing projects by new projects.
⩥The required return on assets is 18 percent. The firm can borrow at
12.5 percent; firm's target debt to value ratio is 3/5. The corporate tax
rate is 34 percent, and the risk-free rate is 4 percent and the market risk
premium is 9.2 percent. What is the weighted average cost of capital?
The firm has a beta of 2.11..
Answer: 14.33 percent
MANAGEMENT MADURA FOURTEENTH
EDITION STUDY GUIDE ALL CHAPTERS
2026 QUESTIONS ANSWERS GRADED A+
⩥Benefits of a multilateral netting system include
- the decrease in the expense associated with funds transfer, which in
some cases can be over $1,000 for a large international transfer of
foreign exchange.
- the benefits that accrue from the establishment of a formal information
system, which serves as the foundation for centrally managing
transaction exposure and the investment of excess funds.
- all of the options
- the reduction in intra-company float, which is frequently as high as five
days even for wire transfers.
- the reduction in the number of foreign exchange transactions and the
associated cost of making fewer but larger transactions.
Answer: all of the options
⩥Which one of the following is a false statement when engaged in
bilateral netting?
Answer: Total interaffiliate receipts need not always equal total
interaffiliate disbursements.
,⩥True or False: A netting center necessarily implies that the MNC has a
central cash manager.
Answer: false
⩥Which of the following statements about multilateral netting system
are correct?
(i) Each affiliate nets all its interaffiliate receipts against all its
disbursements.
(ii) Each affiliate transfers or receives a balance, depending on whether
it is a net payer or receiver.
(iii) The net funds to be received by the affiliates will equal the net
disbursements to be made by the affiliates.
(iv) Only two foreign exchange transactions are necessary since the
affiliates' net receipts will always be equal to zero.
(v) Only two foreign exchange transactions are necessary since the
affiliates' net disbursements will always be equal to zero..
Answer: I, II, and III
⩥True or False: A central cash manager has a global view of the most
favorable borrowing rates and most advantageous investment rates..
Answer: True
,⩥Good cash management encompasses.
Answer: investing excess funds at the most favorable interest rate and
borrowing at the lowest rate when there is a temporary cash shortage.
⩥Your firm's interaffiliate cash receipts and disbursements matrix is
shown here ($000):
Disbursements ReceiptsU.S.CanadaGermanyU.K.Total ReceiptsU.S.
10151540Canada10 101030Germany55 515U.K.202020 60Total
Disbursements35354530
Find the net cash flow in (out of) the U.S. affiliate..
Answer: $5,000 in
⩥A firm keeps a precautionary cash balance to cover unexpected
transactions during the budget period. The size of this balance depends
on how safe the firm desires to be in its ability to meet unexpected
transactions..
Answer: The larger the precautionary cash balance, the greater the
potential opportunity cost.
The larger the precautionary cash balance, the less is the risk of financial
embarrassment and loss of credit standing.
The larger the precautionary cash balance, the greater is the firm's ability
to meet unexpected expenses.
, ⩥As of today, the spot exchange rate is €1.00 = $1.25 and the rates of
inflation expected to prevail for the next year in the U.S. is 2 percent and
3 percent in the euro zone. What is the one-year forward rate that should
prevail?.
Answer: €1.00 = $1.2379
⩥The firm's tax rate is 34 percent. The firm's pre-tax cost of debt is 8
percent; the firm's debt-to-equity ratio is 3; the risk-free rate is 3 percent;
the beta of the firm's common stock is 1.5; the market risk premium is 9
percent. Calculate the weighted average cost of capital..
Answer: 8.09 percent
⩥In the context of the capital budgeting analysis of an MNC that has
strong foreign competitors, "lost sales" refers to.
Answer: the entire sales revenue of a new foreign manufacturing facility
representing the incremental sales revenue of the new project, the
cannibalization of existing projects by new projects.
⩥The required return on assets is 18 percent. The firm can borrow at
12.5 percent; firm's target debt to value ratio is 3/5. The corporate tax
rate is 34 percent, and the risk-free rate is 4 percent and the market risk
premium is 9.2 percent. What is the weighted average cost of capital?
The firm has a beta of 2.11..
Answer: 14.33 percent
