IBUS 401 FINAL EXAM|| LATEST
UPDATE 2025|| VERIFIED A+
When evaluating international project cash flows, which of the following factors is
relevant?
A) futureinflation.
B) blocked funds.
C) exchange rates.
D) alloftheabove - ANSWER all the above
Assume the parent of a U.S.-based MNC plans to completely finance the establishment
of its British subsidiary with existing funds from retained earnings in U.S. operations.
According to the text, the discount rate used in the capital budgeting analysis on this
project should be most affected by:
A) the cost of borrowing funds in the U.K.
B) the cost of borrowing funds in the U.S.
C) the parent's cost of capital.
D) A and B - ANSWER the parent's cost of capital.
Other things being equal, a blocked funds restriction is more likely to have a significant
adverse effect on a project if the currency of that country is expected to _______ over
time, and if the interest rate in that country is relatively ______
A) appreciate;low
B) appreciate; high
C) depreciate; high
D) depreciate;low - ANSWER depreciate;low
The discrepancy between the feasibility of a project in a host country from the
perspective of the U.S. parent versus the subsidiary administering the project is likely to
be greater for projects in countries where:
A) thetaxesarethesameasintheU.S.
B) there are no blocked fund restrictions.
C) the currency of the host country is expected to depreciate consistently.
D) noneoftheabove;adiscrepancyisnotpossible. - ANSWER the currency of the host
country is expected to depreciate consistently
When a foreign subsidiary is not wholly owned by the parent and a foreign project is
partially financed with retained earnings of the parent and of the subsidiary, then:
A)theparent'sperspectiveshouldbeusedtoevaluateaforeignproject.B) the subsidiary's
perspective should be used to evaluate a foreign project.
C) the foreign project should enhance the value of both the parent and the subsidiary.
D) noneoftheabove - ANSWER the foreign project should enhance the value of both the
parent and the subsidiary
, A foreign project in Hungary and another in Japan had the same perceived value from
the U.S. parent's perspective. Then, the exchange rate expectations were revised,
upward for the value of the Hungarian forint and downward for the Japanese yen. The
break-even salvage value for the project in Japan would now be ____ from the parent's
perspective.
a. negative
b. higher than that for the Hungarian project
c. lower than that for the Hungarian project
d. the same as that for the Hungarian project
e. negative AND lower than that for the Hungarian project - ANSWER higher than that
for the Hungarian project
. If a host government restricts the remittances from a foreign subsidiary, a possible
solution is to let the subsidiary obtain partial financing for the project.
A) true.
B) false. - ANSWER true
An argument for MNCs to have a debt-intensive capital structure is:
a. they are well diversified.
b. foreign government tax rules may change over time.
c. exposure to exchange rate fluctuations.
d. exposure to fund blockage. - ANSWER they are well diversified.
According to class discussion, there is evidence that the debt ratios (debt/capital) of
MNCs based in:
a. the U.S. tend to be generally higher than MNCs headquartered in Japan and
Germany.
b. the United Kingdom tend to be generally higher than MNCs headquartered in other
non-U.S. countries.
c. the U.S. tend to be generally lower than MNCs headquartered in Japan and
Germany.
d. A and B - ANSWER the U.S. tend to be generally lower than MNCs headquartered in
Japan and Germany.
Which of the following factors is not expected to generally have a favorable impact on
the firm's cost of capital according to the text?
a. easy access to international capital markets.
b. high degree of international diversification.
c. volatile exchange rate fluctuations.
d. all of the above - ANSWER volatile exchange rate fluctuations.
The capital asset pricing theory is based on the premise that:
a. only unsystematic variability in cash flows is relevant. b. only systematic variability in
cash flows is relevant.
c. both systematic and unsystematic variability in cash flows are relevant.
UPDATE 2025|| VERIFIED A+
When evaluating international project cash flows, which of the following factors is
relevant?
A) futureinflation.
B) blocked funds.
C) exchange rates.
D) alloftheabove - ANSWER all the above
Assume the parent of a U.S.-based MNC plans to completely finance the establishment
of its British subsidiary with existing funds from retained earnings in U.S. operations.
According to the text, the discount rate used in the capital budgeting analysis on this
project should be most affected by:
A) the cost of borrowing funds in the U.K.
B) the cost of borrowing funds in the U.S.
C) the parent's cost of capital.
D) A and B - ANSWER the parent's cost of capital.
Other things being equal, a blocked funds restriction is more likely to have a significant
adverse effect on a project if the currency of that country is expected to _______ over
time, and if the interest rate in that country is relatively ______
A) appreciate;low
B) appreciate; high
C) depreciate; high
D) depreciate;low - ANSWER depreciate;low
The discrepancy between the feasibility of a project in a host country from the
perspective of the U.S. parent versus the subsidiary administering the project is likely to
be greater for projects in countries where:
A) thetaxesarethesameasintheU.S.
B) there are no blocked fund restrictions.
C) the currency of the host country is expected to depreciate consistently.
D) noneoftheabove;adiscrepancyisnotpossible. - ANSWER the currency of the host
country is expected to depreciate consistently
When a foreign subsidiary is not wholly owned by the parent and a foreign project is
partially financed with retained earnings of the parent and of the subsidiary, then:
A)theparent'sperspectiveshouldbeusedtoevaluateaforeignproject.B) the subsidiary's
perspective should be used to evaluate a foreign project.
C) the foreign project should enhance the value of both the parent and the subsidiary.
D) noneoftheabove - ANSWER the foreign project should enhance the value of both the
parent and the subsidiary
, A foreign project in Hungary and another in Japan had the same perceived value from
the U.S. parent's perspective. Then, the exchange rate expectations were revised,
upward for the value of the Hungarian forint and downward for the Japanese yen. The
break-even salvage value for the project in Japan would now be ____ from the parent's
perspective.
a. negative
b. higher than that for the Hungarian project
c. lower than that for the Hungarian project
d. the same as that for the Hungarian project
e. negative AND lower than that for the Hungarian project - ANSWER higher than that
for the Hungarian project
. If a host government restricts the remittances from a foreign subsidiary, a possible
solution is to let the subsidiary obtain partial financing for the project.
A) true.
B) false. - ANSWER true
An argument for MNCs to have a debt-intensive capital structure is:
a. they are well diversified.
b. foreign government tax rules may change over time.
c. exposure to exchange rate fluctuations.
d. exposure to fund blockage. - ANSWER they are well diversified.
According to class discussion, there is evidence that the debt ratios (debt/capital) of
MNCs based in:
a. the U.S. tend to be generally higher than MNCs headquartered in Japan and
Germany.
b. the United Kingdom tend to be generally higher than MNCs headquartered in other
non-U.S. countries.
c. the U.S. tend to be generally lower than MNCs headquartered in Japan and
Germany.
d. A and B - ANSWER the U.S. tend to be generally lower than MNCs headquartered in
Japan and Germany.
Which of the following factors is not expected to generally have a favorable impact on
the firm's cost of capital according to the text?
a. easy access to international capital markets.
b. high degree of international diversification.
c. volatile exchange rate fluctuations.
d. all of the above - ANSWER volatile exchange rate fluctuations.
The capital asset pricing theory is based on the premise that:
a. only unsystematic variability in cash flows is relevant. b. only systematic variability in
cash flows is relevant.
c. both systematic and unsystematic variability in cash flows are relevant.
