IBUS 401 CHAPTER 1 EOC
COMPLETELY SOLVED!!
Explain the agency problem of MNCs. - ANSWER Management does not correctly do
what they need to do to maximize shareholder wealth
Why might agency costs be larger for an MNC than for a purely domestic firm? -
ANSWER They are further away, also cultural expectations differ and this may cause
more agency conflicts
Explain how the existence of imperfect markets has led to the establishment of
subsidiaries in foreign markets. - ANSWER Perfect market- anything I need, I can get
Imperfect market causes you to go after stuff = estb subsidiaries
Benefits and Risks of International Business As an overall review of this chapter,
identify possible reasons for growth in international business. Then list the various
disadvantages that may discourage international business. - ANSWER Creates inc
revenues (new customers) and decreased costs (labor, raw materials, land, economies
of scale)
If perfect markets existed, would wages, prices, and interest rates among countries be
more similar or less similar than under conditions of imperfect markets? Why? -
ANSWER
. Do you think the acquisition of a foreign firm or licensing will result in greater growth for
an MNC? Which alternative is likely to have more risk? - ANSWER Acquisition will result
in greater growth but has more risk
Describe a scenario in which the size of a corporation is not affected by access to
international opportunities. - ANSWER If they are not interested in international
opportunities
Explain why MNCs such as Coca-Cola and PepsiCo, Inc., still have numerous
opportunities for international expansion - ANSWER Bc not everyone has access to
coke/ pepsi and until they do there are still opportunities
Valuation of an MNC Hudson Co., a U.S. firm, has a subsidiary in Mexico, where
political risk has recently increased. Hudson's best guess of its future peso cash flows to
be received has not changed. However, its valuation has declined as a result of the
increase in political risk. Explain. - ANSWER This is due to the fluctuation of the
exchange rate, you get the same amount of pesos but the value went down in dollars
COMPLETELY SOLVED!!
Explain the agency problem of MNCs. - ANSWER Management does not correctly do
what they need to do to maximize shareholder wealth
Why might agency costs be larger for an MNC than for a purely domestic firm? -
ANSWER They are further away, also cultural expectations differ and this may cause
more agency conflicts
Explain how the existence of imperfect markets has led to the establishment of
subsidiaries in foreign markets. - ANSWER Perfect market- anything I need, I can get
Imperfect market causes you to go after stuff = estb subsidiaries
Benefits and Risks of International Business As an overall review of this chapter,
identify possible reasons for growth in international business. Then list the various
disadvantages that may discourage international business. - ANSWER Creates inc
revenues (new customers) and decreased costs (labor, raw materials, land, economies
of scale)
If perfect markets existed, would wages, prices, and interest rates among countries be
more similar or less similar than under conditions of imperfect markets? Why? -
ANSWER
. Do you think the acquisition of a foreign firm or licensing will result in greater growth for
an MNC? Which alternative is likely to have more risk? - ANSWER Acquisition will result
in greater growth but has more risk
Describe a scenario in which the size of a corporation is not affected by access to
international opportunities. - ANSWER If they are not interested in international
opportunities
Explain why MNCs such as Coca-Cola and PepsiCo, Inc., still have numerous
opportunities for international expansion - ANSWER Bc not everyone has access to
coke/ pepsi and until they do there are still opportunities
Valuation of an MNC Hudson Co., a U.S. firm, has a subsidiary in Mexico, where
political risk has recently increased. Hudson's best guess of its future peso cash flows to
be received has not changed. However, its valuation has declined as a result of the
increase in political risk. Explain. - ANSWER This is due to the fluctuation of the
exchange rate, you get the same amount of pesos but the value went down in dollars
