IBUS 401 Exam 3 2024/2025 Exam
Comprehensive Questions and Verified
Answers | Accurate Solutions | Get it 100%
Correct!! | Already Graded A
16. According to the text, the most appropriate method of incorporating country risk into capital
budgeting analysis is to: - ✔✔ANSWER✔✔->>estimate the effect of each form of country risk on cash
flows.
17. The Multilateral Investment Guarantee Agency can provide MNCs implementing direct foreign
investment in less developed countries with: - ✔✔ANSWER✔✔->>political risk insurance.
18. Country risk analysis is important because it: - ✔✔ANSWER✔✔->>can be used to improve the
analysis used to make long-term investing decisions.
19. ____ is (are) not a form of political risk. - ✔✔ANSWER✔✔->>Exchange rate movements
,20. Eurenasia is a country that has frequently been assigned low macro-assessment ratings of country
risk in the recent past due to its tendency to war with neighboring nations. MNC A is considering the
establishment of a subsidiary to manufacture personal computers, while MNC B is considering the
establishment of a subsidiary to manufacture tanks. Which of the two MNCs is likely to be less affected
by the low macro-assessment? - ✔✔ANSWER✔✔->>MNC B.
21. Which of the following is not a technique to assess country risk? - ✔✔ANSWER✔✔->>Gamma
technique.
22. The ____ involves the collection of independent opinions on country risk without group discussion
by the assessors who provide these opinions. - ✔✔ANSWER✔✔->>Delphi technique
23. When quantifying country risk: - ✔✔ANSWER✔✔->>weights should be assigned to the political and
financial factors according to their perceived importance.
24. Which of the following is not a strategy that could be used by an MNC to reduce its exposure to a
host government takeover? - ✔✔ANSWER✔✔->>Attempt to recover cash flows from a foreign
investment as quickly as possible
Rely on unique supplies and/or technology
Hire local labor
Borrow local funds
All of the above are strategies to reduce an MNC's exposure to a host government takeover.
25. MNCs can purchase insurance to cover the risk of expropriation. Which of the following is not a
source of this type of insurance? - ✔✔ANSWER✔✔->>the International Monetary Fund (IMF).
26. Which of the following is not a way in which country risk analysis can be used? - ✔✔ANSWER✔✔-
>>to determine the degree to which the MNC is exposed to exchange rate movements.
27. An MNC must assess country risk not only in countries where it currently does business but also in
those where it expects to export or establish subsidiaries. - ✔✔ANSWER✔✔->>True
,28. ____ is not a political risk factor. - ✔✔ANSWER✔✔->>High interest rates in a foreign country
29. A mild form of political risk is a tendency of residents to purchase only: - ✔✔ANSWER✔✔->>locally
produced products.
30. To make an MNC's operations coincide with its own goal, a host government could do all of the
following, except: - ✔✔ANSWER✔✔->>subsidize the MNC.
31. When a country's currency is inconvertible, the earnings generated by a subsidiary in that country
cannot be remitted to the parent through currency conversion. - ✔✔ANSWER✔✔->>True
32. When the war in Iraq began in 2003, some MNCs feared that oil prices would ____ and that U.S.
inflation and interest rates would ____. - ✔✔ANSWER✔✔->>rise; rise
33. Higher interest rates in a foreign country tend to ____ the growth of an economy and ____ demand
for the MNC's product. - ✔✔ANSWER✔✔->>reduce; reduce
34. A ____ currency may ____ the volume of products imported by the country and therefore reduce
the country's production and national income. - ✔✔ANSWER✔✔->>strong; increase
35. Risk assessors almost always arrive at the same opinion after completing a macro-assessment of
country risk. - ✔✔ANSWER✔✔->>False
36. ____ involve(s) the collection of independent opinions on country risk without group discussion by
the assessors who provide these opinions. - ✔✔ANSWER✔✔->>The Delphi technique
37. Perhaps the most appropriate method for incorporating forms of country risk in a capital budgeting
analysis is to estimate how the ____ would be affected by each form of risk. - ✔✔ANSWER✔✔->>cash
flows
38. Since country risk is constantly changing and events in other parts of the world are largely
unpredictable, country risk analysis is not important for MNCs. - ✔✔ANSWER✔✔->>False
, 39. A blockage of fund transfers imposed by a host government usually forces a subsidiary to donate the
funds to the host government. - ✔✔ANSWER✔✔->>False
40. Higher interest rates tend to increase the growth of an economy and increase the demand for an
MNC's products. - ✔✔ANSWER✔✔->>False
41. When using a checklist approach to assess country risk, factors should be converted to some
numerical forms and assigned equal weights. - ✔✔ANSWER✔✔->>False
42. Unlike project risk, country risk cannot be incorporated into the capital budgeting analysis of a
proposed project by adjustment of the discount rate or by adjustment of the estimated cash flows. -
✔✔ANSWER✔✔->>False
43. After a project is accepted and implemented, country risk does not need to be monitored; since the
project is already established, no further changes can be made. - ✔✔ANSWER✔✔->>False
44. While an overall risk rating of a country can be useful, it cannot always detect upcoming crises. -
✔✔ANSWER✔✔->>True
45. Country risk can affect an MNC's cash flows but cannot affect its cost of capital. - ✔✔ANSWER✔✔-
>>False
46. To reduce the exposure to a host government takeover, an MNC may attempt to recover cash flows
from the foreign project more quickly or hire local labor. - ✔✔ANSWER✔✔->>True
47. The weights assigned to factors when assessing country risk should always be higher for the political
risk factors than the financial factors. - ✔✔ANSWER✔✔->>False
48. A micro-assessment of country risk involves consideration of all variables that affect country risk
except for those unique to a particular firm or industry. - ✔✔ANSWER✔✔->>False
Comprehensive Questions and Verified
Answers | Accurate Solutions | Get it 100%
Correct!! | Already Graded A
16. According to the text, the most appropriate method of incorporating country risk into capital
budgeting analysis is to: - ✔✔ANSWER✔✔->>estimate the effect of each form of country risk on cash
flows.
17. The Multilateral Investment Guarantee Agency can provide MNCs implementing direct foreign
investment in less developed countries with: - ✔✔ANSWER✔✔->>political risk insurance.
18. Country risk analysis is important because it: - ✔✔ANSWER✔✔->>can be used to improve the
analysis used to make long-term investing decisions.
19. ____ is (are) not a form of political risk. - ✔✔ANSWER✔✔->>Exchange rate movements
,20. Eurenasia is a country that has frequently been assigned low macro-assessment ratings of country
risk in the recent past due to its tendency to war with neighboring nations. MNC A is considering the
establishment of a subsidiary to manufacture personal computers, while MNC B is considering the
establishment of a subsidiary to manufacture tanks. Which of the two MNCs is likely to be less affected
by the low macro-assessment? - ✔✔ANSWER✔✔->>MNC B.
21. Which of the following is not a technique to assess country risk? - ✔✔ANSWER✔✔->>Gamma
technique.
22. The ____ involves the collection of independent opinions on country risk without group discussion
by the assessors who provide these opinions. - ✔✔ANSWER✔✔->>Delphi technique
23. When quantifying country risk: - ✔✔ANSWER✔✔->>weights should be assigned to the political and
financial factors according to their perceived importance.
24. Which of the following is not a strategy that could be used by an MNC to reduce its exposure to a
host government takeover? - ✔✔ANSWER✔✔->>Attempt to recover cash flows from a foreign
investment as quickly as possible
Rely on unique supplies and/or technology
Hire local labor
Borrow local funds
All of the above are strategies to reduce an MNC's exposure to a host government takeover.
25. MNCs can purchase insurance to cover the risk of expropriation. Which of the following is not a
source of this type of insurance? - ✔✔ANSWER✔✔->>the International Monetary Fund (IMF).
26. Which of the following is not a way in which country risk analysis can be used? - ✔✔ANSWER✔✔-
>>to determine the degree to which the MNC is exposed to exchange rate movements.
27. An MNC must assess country risk not only in countries where it currently does business but also in
those where it expects to export or establish subsidiaries. - ✔✔ANSWER✔✔->>True
,28. ____ is not a political risk factor. - ✔✔ANSWER✔✔->>High interest rates in a foreign country
29. A mild form of political risk is a tendency of residents to purchase only: - ✔✔ANSWER✔✔->>locally
produced products.
30. To make an MNC's operations coincide with its own goal, a host government could do all of the
following, except: - ✔✔ANSWER✔✔->>subsidize the MNC.
31. When a country's currency is inconvertible, the earnings generated by a subsidiary in that country
cannot be remitted to the parent through currency conversion. - ✔✔ANSWER✔✔->>True
32. When the war in Iraq began in 2003, some MNCs feared that oil prices would ____ and that U.S.
inflation and interest rates would ____. - ✔✔ANSWER✔✔->>rise; rise
33. Higher interest rates in a foreign country tend to ____ the growth of an economy and ____ demand
for the MNC's product. - ✔✔ANSWER✔✔->>reduce; reduce
34. A ____ currency may ____ the volume of products imported by the country and therefore reduce
the country's production and national income. - ✔✔ANSWER✔✔->>strong; increase
35. Risk assessors almost always arrive at the same opinion after completing a macro-assessment of
country risk. - ✔✔ANSWER✔✔->>False
36. ____ involve(s) the collection of independent opinions on country risk without group discussion by
the assessors who provide these opinions. - ✔✔ANSWER✔✔->>The Delphi technique
37. Perhaps the most appropriate method for incorporating forms of country risk in a capital budgeting
analysis is to estimate how the ____ would be affected by each form of risk. - ✔✔ANSWER✔✔->>cash
flows
38. Since country risk is constantly changing and events in other parts of the world are largely
unpredictable, country risk analysis is not important for MNCs. - ✔✔ANSWER✔✔->>False
, 39. A blockage of fund transfers imposed by a host government usually forces a subsidiary to donate the
funds to the host government. - ✔✔ANSWER✔✔->>False
40. Higher interest rates tend to increase the growth of an economy and increase the demand for an
MNC's products. - ✔✔ANSWER✔✔->>False
41. When using a checklist approach to assess country risk, factors should be converted to some
numerical forms and assigned equal weights. - ✔✔ANSWER✔✔->>False
42. Unlike project risk, country risk cannot be incorporated into the capital budgeting analysis of a
proposed project by adjustment of the discount rate or by adjustment of the estimated cash flows. -
✔✔ANSWER✔✔->>False
43. After a project is accepted and implemented, country risk does not need to be monitored; since the
project is already established, no further changes can be made. - ✔✔ANSWER✔✔->>False
44. While an overall risk rating of a country can be useful, it cannot always detect upcoming crises. -
✔✔ANSWER✔✔->>True
45. Country risk can affect an MNC's cash flows but cannot affect its cost of capital. - ✔✔ANSWER✔✔-
>>False
46. To reduce the exposure to a host government takeover, an MNC may attempt to recover cash flows
from the foreign project more quickly or hire local labor. - ✔✔ANSWER✔✔->>True
47. The weights assigned to factors when assessing country risk should always be higher for the political
risk factors than the financial factors. - ✔✔ANSWER✔✔->>False
48. A micro-assessment of country risk involves consideration of all variables that affect country risk
except for those unique to a particular firm or industry. - ✔✔ANSWER✔✔->>False
