MBA 620 Exam 1 Actual Exam 2026 | Complete Questions
and Correct Answers | Verified Answers | Complete Exam |
Just Released
Question 1
Livingston Co. has a subsidiary in Korea. The subsidiary reinvests half of its
net cash flows into operations and remits half to the parent. Livingston's
expected cash flows from domestic business are $100,000 and the Korean
subsidiary is expected to generate 100 million Korean won at the end of the
year. The expected value of won is $.0012. What are the expected dollar
cash flows of Livingston Co.?
A) $100,000
B) $120,000
C) $160,000
D) $220,000
E) $240,000
Correct Answer: C) 160,000
Rationale: Domestic cash flows = $100,000. Korean won cash flows =
100,000,000 won * $.0012/won = $120,000. Half remitted to parent
= $120, = $60,000. Total expected dollar cash flows =
$100,000 (domestic) + $60,000 (Korean) = $160,000.
Question 2
Assume that an American firm wants to engage in international business
without major investment in the foreign country. Which method is least
appropriate in this situation?
A) International trade
B) Licensing
C) Franchising
D) Direct foreign investment
E) Joint ventures
Correct Answer: D) Direct foreign investment
Rationale: Direct foreign investment typically involves a major capital
,investment (e.g., establishing a subsidiary or acquiring a foreign
company), making it the least appropriate method for avoiding
major investment in a foreign country.
Question 3
The least risky method by which firms conduct international business is:
A) Direct foreign investment
B) Joint ventures
C) Franchising
D) Licensing
E) International Trade
Correct Answer: E) International Trade
Rationale: International trade (importing and exporting) is generally
considered the least risky method of conducting international
business, as it involves minimal commitment of resources and
exposure to foreign market risks compared to other methods.
Question 4
For the MNC (Multinational Corporation), agency costs are typically:
A) Smaller than agency costs of a small purely domestic firm.
B) Larger than agency costs of a small purely domestic firm.
C) The same as agency costs of a small purely domestic firm.
D) Irrelevant.
E) Only present if the MNC has foreign subsidiaries.
Correct Answer: B) larger than agency costs of a small purely domestic
firm.
Rationale: For the MNC, agency costs are typically larger than agency
costs of a small purely domestic firm due to the greater complexity,
geographical dispersion, and cultural differences inherent in
managing international operations.
Question 5
Which of the following is not mentioned in the text as an additional risk
,resulting from international business?
A) Exchange rate risk
B) Political risk
C) Interest rate risk
D) Economic risk
E) All of the above are mentioned.
Correct Answer: C) Interest rate risk
Rationale: Exchange rate risk, political risk, and economic risk are
commonly associated with international business. Interest rate risk,
while a general financial risk, is not singled out as
an additional risk resulting from international business in the same
specific context as exchange rate or political risk in the provided
text.
Question 6
According to the text, a disadvantage of licensing is that:
A) It requires a large initial investment.
B) It is difficult to ensure quality control of the production process.
C) It limits potential market share.
D) It involves sharing profits with foreign entities.
E) It is more risky than direct foreign investment.
Correct Answer: B) it is difficult to ensure quality control of the
production process.
Rationale: A disadvantage of licensing is that it is difficult to ensure
quality control of the production process, as the licensor has less
direct control over the foreign licensee's operations.
Question 7
The commonly accepted goal of the MNC is to:
A) Maximize sales revenue.
B) Minimize production costs.
C) Maximize shareholder wealth.
, D) Maintain stable exchange rates.
E) Expand global market share at any cost.
Correct Answer: C) maximize shareholder wealth
Rationale: The commonly accepted goal of the MNC is to maximize
shareholder wealth, consistent with the objective of most for-profit
corporations.
Question 8
Which of the following does not constitute a form of direct foreign
investment?
A) Acquiring an existing company in a foreign country.
B) Establishing a new subsidiary in a foreign country.
C) International trade.
D) Investing in foreign fixed assets.
E) Purchasing a foreign manufacturing plant.
Correct Answer: C) International trade
Rationale: Direct foreign investment involves actively acquiring or
establishing foreign operations, whereas international trade
(importing/exporting) is simply buying/selling goods across borders
without direct ownership or control of foreign assets.
Question 9
Which of the following is an example of direct foreign investment?
A) Exporting goods to a foreign country.
B) Licensing a foreign firm to produce your product.
C) Purchasing existing companies in a country.
D) Franchising a foreign business.
E) Engaging in international trade.
Correct Answer: C) purchasing existing companies in a country.
Rationale: Purchasing existing companies in a foreign country is a
clear example of direct foreign investment, as it involves acquiring
ownership and control of foreign assets.
and Correct Answers | Verified Answers | Complete Exam |
Just Released
Question 1
Livingston Co. has a subsidiary in Korea. The subsidiary reinvests half of its
net cash flows into operations and remits half to the parent. Livingston's
expected cash flows from domestic business are $100,000 and the Korean
subsidiary is expected to generate 100 million Korean won at the end of the
year. The expected value of won is $.0012. What are the expected dollar
cash flows of Livingston Co.?
A) $100,000
B) $120,000
C) $160,000
D) $220,000
E) $240,000
Correct Answer: C) 160,000
Rationale: Domestic cash flows = $100,000. Korean won cash flows =
100,000,000 won * $.0012/won = $120,000. Half remitted to parent
= $120, = $60,000. Total expected dollar cash flows =
$100,000 (domestic) + $60,000 (Korean) = $160,000.
Question 2
Assume that an American firm wants to engage in international business
without major investment in the foreign country. Which method is least
appropriate in this situation?
A) International trade
B) Licensing
C) Franchising
D) Direct foreign investment
E) Joint ventures
Correct Answer: D) Direct foreign investment
Rationale: Direct foreign investment typically involves a major capital
,investment (e.g., establishing a subsidiary or acquiring a foreign
company), making it the least appropriate method for avoiding
major investment in a foreign country.
Question 3
The least risky method by which firms conduct international business is:
A) Direct foreign investment
B) Joint ventures
C) Franchising
D) Licensing
E) International Trade
Correct Answer: E) International Trade
Rationale: International trade (importing and exporting) is generally
considered the least risky method of conducting international
business, as it involves minimal commitment of resources and
exposure to foreign market risks compared to other methods.
Question 4
For the MNC (Multinational Corporation), agency costs are typically:
A) Smaller than agency costs of a small purely domestic firm.
B) Larger than agency costs of a small purely domestic firm.
C) The same as agency costs of a small purely domestic firm.
D) Irrelevant.
E) Only present if the MNC has foreign subsidiaries.
Correct Answer: B) larger than agency costs of a small purely domestic
firm.
Rationale: For the MNC, agency costs are typically larger than agency
costs of a small purely domestic firm due to the greater complexity,
geographical dispersion, and cultural differences inherent in
managing international operations.
Question 5
Which of the following is not mentioned in the text as an additional risk
,resulting from international business?
A) Exchange rate risk
B) Political risk
C) Interest rate risk
D) Economic risk
E) All of the above are mentioned.
Correct Answer: C) Interest rate risk
Rationale: Exchange rate risk, political risk, and economic risk are
commonly associated with international business. Interest rate risk,
while a general financial risk, is not singled out as
an additional risk resulting from international business in the same
specific context as exchange rate or political risk in the provided
text.
Question 6
According to the text, a disadvantage of licensing is that:
A) It requires a large initial investment.
B) It is difficult to ensure quality control of the production process.
C) It limits potential market share.
D) It involves sharing profits with foreign entities.
E) It is more risky than direct foreign investment.
Correct Answer: B) it is difficult to ensure quality control of the
production process.
Rationale: A disadvantage of licensing is that it is difficult to ensure
quality control of the production process, as the licensor has less
direct control over the foreign licensee's operations.
Question 7
The commonly accepted goal of the MNC is to:
A) Maximize sales revenue.
B) Minimize production costs.
C) Maximize shareholder wealth.
, D) Maintain stable exchange rates.
E) Expand global market share at any cost.
Correct Answer: C) maximize shareholder wealth
Rationale: The commonly accepted goal of the MNC is to maximize
shareholder wealth, consistent with the objective of most for-profit
corporations.
Question 8
Which of the following does not constitute a form of direct foreign
investment?
A) Acquiring an existing company in a foreign country.
B) Establishing a new subsidiary in a foreign country.
C) International trade.
D) Investing in foreign fixed assets.
E) Purchasing a foreign manufacturing plant.
Correct Answer: C) International trade
Rationale: Direct foreign investment involves actively acquiring or
establishing foreign operations, whereas international trade
(importing/exporting) is simply buying/selling goods across borders
without direct ownership or control of foreign assets.
Question 9
Which of the following is an example of direct foreign investment?
A) Exporting goods to a foreign country.
B) Licensing a foreign firm to produce your product.
C) Purchasing existing companies in a country.
D) Franchising a foreign business.
E) Engaging in international trade.
Correct Answer: C) purchasing existing companies in a country.
Rationale: Purchasing existing companies in a foreign country is a
clear example of direct foreign investment, as it involves acquiring
ownership and control of foreign assets.
