FINA 4500 Test 1 Questions with 100% Correct
Answers
equation to estimate the Value of a company's total cash flow
Cash flow each year :
US Dollars Receipt + ( currency 1 x exchange) +(currency 1 x exchange)
Value = (cash flow 1st year/ (1+rate of return)^1) + (cash flow 2nd year/ (1+rate of return)^2)
if US sells to Country where their dollar value goes up then their exports will
Decrease
if US sells to Country where their dollar value goes down then their exports will
Increase
If a company based in the US is competing with another country and there dollar
strengthens against the other countries then the companies net cash flows will
Decrease
If a company based in the US is competing with another country and there dollar
weakens against the other countries then the companies net cash flows will
increase
Product Cycle Theory
as a firm matures, it recognizes opportunities outside its domestic market
comparative advantage theory
, theory that states that a country should sell to other countries those products that it produces
most effectively and efficiently, and buy from other countries those products that it cannot
produce as effectively or efficiently
Examples of net investment income
interest, dividends, investments, and profits
Examples of transfers
social security and aid
Examples of Capital accounts
bonds, stocks, investments, deposits, and real estate
Examples of Official reserves
currency
Examples of services
tourists and workers on foreign bases
factors associated with large US trade deficits
- low savings rate in US
- high spending rate, relative to income levels
- high value of US dollar in foreign exchange market
what happens if inflation/ price levels increase
- exports decrease
- imports increase
Answers
equation to estimate the Value of a company's total cash flow
Cash flow each year :
US Dollars Receipt + ( currency 1 x exchange) +(currency 1 x exchange)
Value = (cash flow 1st year/ (1+rate of return)^1) + (cash flow 2nd year/ (1+rate of return)^2)
if US sells to Country where their dollar value goes up then their exports will
Decrease
if US sells to Country where their dollar value goes down then their exports will
Increase
If a company based in the US is competing with another country and there dollar
strengthens against the other countries then the companies net cash flows will
Decrease
If a company based in the US is competing with another country and there dollar
weakens against the other countries then the companies net cash flows will
increase
Product Cycle Theory
as a firm matures, it recognizes opportunities outside its domestic market
comparative advantage theory
, theory that states that a country should sell to other countries those products that it produces
most effectively and efficiently, and buy from other countries those products that it cannot
produce as effectively or efficiently
Examples of net investment income
interest, dividends, investments, and profits
Examples of transfers
social security and aid
Examples of Capital accounts
bonds, stocks, investments, deposits, and real estate
Examples of Official reserves
currency
Examples of services
tourists and workers on foreign bases
factors associated with large US trade deficits
- low savings rate in US
- high spending rate, relative to income levels
- high value of US dollar in foreign exchange market
what happens if inflation/ price levels increase
- exports decrease
- imports increase
