IBUS 401 Exam 3 Practice 2026|2027
Questions and Answers with Complete
A+ Solutions 100% Correct!!!
In general, the ____ the cost of capital, the _____ the NPV of a project that is evaluated with
this cost of capital
- higher; higher
- lower; lower
- higher; lower
- A and B
- none of the above - correct Answer -higher; lower
A firm's cost of _____ reflects an opportunity cost: what the the existing shareholders could
have earned if they had received the earnings as dividends and invested the funds themselves.
- debt
- retained earnings
- new common equity
- none of the above - correct Answer -retained earnings
Consider Firm A and Firm B that both produce the same product. Firm A would more likely have
a more stable cash flow if its percentage of foreign sales were ________ and the number of
foreign countries it sold products to was _______.
- higher; large
, - higher; small
- lower; small - correct Answer -higher; large
According to information in the text, a host government would be least likely to provide
incentives for DFI into its country if the firm planning DFI:
- would compete with local firms of the host country
- would product a good not currently available in the host country
- would produce a good and export it to other countries
- B and C - correct Answer -would compete with local firms of the host country
T/F: when a foreign currency is perceived by a firm to be undervalued, the firm may consider
direct foreign investment in that country, as the initial outlay should be relatively low - correct
Answer -true
If a US 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.
- strengthening euro
- stable euro
- weak euro
- both B and C are ideal - correct Answer -strengthening euro
Questions and Answers with Complete
A+ Solutions 100% Correct!!!
In general, the ____ the cost of capital, the _____ the NPV of a project that is evaluated with
this cost of capital
- higher; higher
- lower; lower
- higher; lower
- A and B
- none of the above - correct Answer -higher; lower
A firm's cost of _____ reflects an opportunity cost: what the the existing shareholders could
have earned if they had received the earnings as dividends and invested the funds themselves.
- debt
- retained earnings
- new common equity
- none of the above - correct Answer -retained earnings
Consider Firm A and Firm B that both produce the same product. Firm A would more likely have
a more stable cash flow if its percentage of foreign sales were ________ and the number of
foreign countries it sold products to was _______.
- higher; large
, - higher; small
- lower; small - correct Answer -higher; large
According to information in the text, a host government would be least likely to provide
incentives for DFI into its country if the firm planning DFI:
- would compete with local firms of the host country
- would product a good not currently available in the host country
- would produce a good and export it to other countries
- B and C - correct Answer -would compete with local firms of the host country
T/F: when a foreign currency is perceived by a firm to be undervalued, the firm may consider
direct foreign investment in that country, as the initial outlay should be relatively low - correct
Answer -true
If a US 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.
- strengthening euro
- stable euro
- weak euro
- both B and C are ideal - correct Answer -strengthening euro
