IBUS 401 EXAM 3 LATEST UPDATE
2025|| VERIFIED A+
T/F: There is an advantage to using equity rather than debt financing because dividend
payments are tax deductible - ANSWER False
Capital asset pricing theory would most likely suggest that the cost of capital is
generally ______ for _______ - ANSWER lower; MNC's
A firm's cost of ________ reflect an opportunity cost: what the existing shareholders
could have earned if they had received the earnings as dividends and invested the
funds themselves - ANSWER retained earnings
When an MNC assesses targets among countries, it would prefer a country where the
growth potential for its industry is ______ and the competition within the industry is
_________ - ANSWER high; not excessive
T/F: An international acquisition may be preferable to the establishment of a new
subsidiary because the firm can immediately expand its international business and
benefit from existing customer relationships - ANSWER true
T/F: From an acquirer's perspective, the ideal conditions would be a weak foreign
currency at the time of acquisition and a strengthening of the foreign currency over time
as funds are remitted back to the parent - ANSWER true
T/F: Assuming that a subsidiary is wholly owned, a subsidiary's perspective is
appropriate in attempting to determine whether a project will enhance the firm's value -
ANSWER false
A mild form of political risk is a tendency of residents to purchase only: - ANSWER
locally produced products
When quantifying country risk: - ANSWER weights should be assigned to the political
and financial factors according to their perceived importance
When determining whether a particular proposed project in a foreign country is feasible:
- ANSWER country risk analysis should be incorporated within the capital budgeting
analysis
Other things being equal, firms from a particular home country will engage more in
international acquisitions if they expect foreign currencies to ______ against their home
currency, and if their cost of capital is relatively _____ - ANSWER appreciate; low
2025|| VERIFIED A+
T/F: There is an advantage to using equity rather than debt financing because dividend
payments are tax deductible - ANSWER False
Capital asset pricing theory would most likely suggest that the cost of capital is
generally ______ for _______ - ANSWER lower; MNC's
A firm's cost of ________ reflect an opportunity cost: what the existing shareholders
could have earned if they had received the earnings as dividends and invested the
funds themselves - ANSWER retained earnings
When an MNC assesses targets among countries, it would prefer a country where the
growth potential for its industry is ______ and the competition within the industry is
_________ - ANSWER high; not excessive
T/F: An international acquisition may be preferable to the establishment of a new
subsidiary because the firm can immediately expand its international business and
benefit from existing customer relationships - ANSWER true
T/F: From an acquirer's perspective, the ideal conditions would be a weak foreign
currency at the time of acquisition and a strengthening of the foreign currency over time
as funds are remitted back to the parent - ANSWER true
T/F: Assuming that a subsidiary is wholly owned, a subsidiary's perspective is
appropriate in attempting to determine whether a project will enhance the firm's value -
ANSWER false
A mild form of political risk is a tendency of residents to purchase only: - ANSWER
locally produced products
When quantifying country risk: - ANSWER weights should be assigned to the political
and financial factors according to their perceived importance
When determining whether a particular proposed project in a foreign country is feasible:
- ANSWER country risk analysis should be incorporated within the capital budgeting
analysis
Other things being equal, firms from a particular home country will engage more in
international acquisitions if they expect foreign currencies to ______ against their home
currency, and if their cost of capital is relatively _____ - ANSWER appreciate; low
