FIN 4213 Questions And Answers With
Complete Solutions
According to information in the text, a host government would be least likely to provide incentives for
direct foreign investment (DFI) into its country if the firm planning DFI: - ANSWER -would compete with
local firms of the host country.
A firm will likely benefit most from diversifying if: - ANSWER -the correlations between country
economies are low.
Which of the following is a reason to consider international business? - ANSWER -a. economies of scale.
b. exploit monopolistic advantages.
c. diversification.
Direct foreign investment would typically be welcomed if: - ANSWER -the products to be produced are
going to be exported.
____ is NOT a revenue-related motive for direct foreign investment. - ANSWER -Fully benefiting from
economies of scale
____ is NOT a cost-related motive for direct foreign investment (DFI). - ANSWER -Reacting to trade
restrictions
When a firm perceives that a foreign currency is ____, the firm may attempt direct foreign investment in
that country, as the initial outlay should be relatively ____. - ANSWER -undervalued; low
Procedural and documentation requirements imposed by the foreign government are referred to as: -
ANSWER -"Red Tape" barriers.
, If a U.S. parent is setting up a French subsidiary, and funds from the subsidiary will be periodically sent
to the parent, the ideal situation from the parent's perspective is a ____ after the subsidiary is
established. - ANSWER -strengthening euro
When evaluating international project cash flows, which of the following factors is relevant? - ANSWER -
a. future inflation.
b. blocked funds.
c. exchange rates.
As the financing of a foreign project by the parent ____ relative to the financing provided by the
subsidiary, the parent's exchange rate exposure ____. - ANSWER -increases; increases
___ is (are) not a form of political risk. - ANSWER -Exchange rate movements
The checklist approach: - ANSWER -requires ratings and weights to be assigned to all factors relevant in
assessing country risk.
A firm may incorporate a country risk rating into the capital budgeting analysis by: - ANSWER -adjusting
the discount rate upward as the country risk rating decreases (implying increased risk).
According to the text, the most appropriate method of incorporating country risk into capital budgeting
analysis is to: - ANSWER -estimate the effect of each form of country risk on cash flows.
To best reduce exposure to a host government takeover, a subsidiary could: - ANSWER -attempt to
obtain supplies from its parent for which substitutes are not available.
The management goal of the MNC is to: - ANSWER -maximize market value of the whole MNC.
Which of the following theories identifies specialization as a reason for international business? -
ANSWER -Theory of comparative advantage
Complete Solutions
According to information in the text, a host government would be least likely to provide incentives for
direct foreign investment (DFI) into its country if the firm planning DFI: - ANSWER -would compete with
local firms of the host country.
A firm will likely benefit most from diversifying if: - ANSWER -the correlations between country
economies are low.
Which of the following is a reason to consider international business? - ANSWER -a. economies of scale.
b. exploit monopolistic advantages.
c. diversification.
Direct foreign investment would typically be welcomed if: - ANSWER -the products to be produced are
going to be exported.
____ is NOT a revenue-related motive for direct foreign investment. - ANSWER -Fully benefiting from
economies of scale
____ is NOT a cost-related motive for direct foreign investment (DFI). - ANSWER -Reacting to trade
restrictions
When a firm perceives that a foreign currency is ____, the firm may attempt direct foreign investment in
that country, as the initial outlay should be relatively ____. - ANSWER -undervalued; low
Procedural and documentation requirements imposed by the foreign government are referred to as: -
ANSWER -"Red Tape" barriers.
, If a U.S. parent is setting up a French subsidiary, and funds from the subsidiary will be periodically sent
to the parent, the ideal situation from the parent's perspective is a ____ after the subsidiary is
established. - ANSWER -strengthening euro
When evaluating international project cash flows, which of the following factors is relevant? - ANSWER -
a. future inflation.
b. blocked funds.
c. exchange rates.
As the financing of a foreign project by the parent ____ relative to the financing provided by the
subsidiary, the parent's exchange rate exposure ____. - ANSWER -increases; increases
___ is (are) not a form of political risk. - ANSWER -Exchange rate movements
The checklist approach: - ANSWER -requires ratings and weights to be assigned to all factors relevant in
assessing country risk.
A firm may incorporate a country risk rating into the capital budgeting analysis by: - ANSWER -adjusting
the discount rate upward as the country risk rating decreases (implying increased risk).
According to the text, the most appropriate method of incorporating country risk into capital budgeting
analysis is to: - ANSWER -estimate the effect of each form of country risk on cash flows.
To best reduce exposure to a host government takeover, a subsidiary could: - ANSWER -attempt to
obtain supplies from its parent for which substitutes are not available.
The management goal of the MNC is to: - ANSWER -maximize market value of the whole MNC.
Which of the following theories identifies specialization as a reason for international business? -
ANSWER -Theory of comparative advantage
