IBUS 401 Exam 3 with verified detailed answers ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
Which of the following is a reason to consider international business?
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- economies of scale
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- exploit monopolistic advantages
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- diversification
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- all of the above - correct answer✔✔all of the above
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When a firm perceives that a foreign currency is _______, the firm may attempt direct
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foreign investment in that country, as the initial outlay should be relatively _________.
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- overvalued; high
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- overvalued; low
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- undervalued; high
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- undervalued; low - correct answer✔✔undervalued; low
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T/F: MNCs can probably achieve more desirable risk-return characteristics from their
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project portfolios if they sufficiently diversify among products and geographical markets. -
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correct answer✔✔true ||\\|//||
When evaluating international project cash flows, which of the following factors is relevant
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- future inflation
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- blocked funds
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- exchange rates
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- all of the above - correct answer✔✔all of the above
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, A US-based MNC has just established a subsidiary in Algeria. Shortly after the plant was
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built, the MNC determines that its exchange rate forecasts, which had previously indicated
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a slight appreciation in the Algerian dinar, were probably false. Instead of a slight
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appreciation, the MNC now expects that the dinar will depreciate substantially due to ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
political turmoil in Algeria. This new development would likely cause the MNC to _______ ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
its estimate of the previously computed net present value.
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- lower ||\\|//||
- increase ||\\|//||
- lower, but not necessarily if the mNC invests enough in Algeria to offset the decrease in
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NPV
- increase, but not necessarily if the MNC reduces its investment in Algeria by an offsetting
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amount - correct answer✔✔lower
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Other tings being equal, firms from a particular home country will engage in more
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international acquisitions if they expect foreign currencies to _______ against their home ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
currency, and if their cost of capital is relatively _________. ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
- appreciate; low
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- appreciate; high
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- depreciate; high
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- depreciate; low - correct answer✔✔appreciate; low
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An MNC's parent would consider investing in a target only if the estimated present value
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of the cash flows it would ultimately receive from the target over time _____ the initial
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outlay necessary to purchase the target. ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
- is less than
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- is the same as
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- is greater than
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- none of the above - correct answer✔✔is greater than
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Which of the following is a reason to consider international business?
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- economies of scale
||\\|//|| ||\\|//|| ||\\|//||
- exploit monopolistic advantages
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- diversification
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- all of the above - correct answer✔✔all of the above
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When a firm perceives that a foreign currency is _______, the firm may attempt direct
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foreign investment in that country, as the initial outlay should be relatively _________.
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- overvalued; high
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- overvalued; low
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- undervalued; high
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- undervalued; low - correct answer✔✔undervalued; low
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T/F: MNCs can probably achieve more desirable risk-return characteristics from their
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project portfolios if they sufficiently diversify among products and geographical markets. -
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correct answer✔✔true ||\\|//||
When evaluating international project cash flows, which of the following factors is relevant
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- future inflation
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- blocked funds
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- exchange rates
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- all of the above - correct answer✔✔all of the above
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, A US-based MNC has just established a subsidiary in Algeria. Shortly after the plant was
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built, the MNC determines that its exchange rate forecasts, which had previously indicated
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
a slight appreciation in the Algerian dinar, were probably false. Instead of a slight
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appreciation, the MNC now expects that the dinar will depreciate substantially due to ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
political turmoil in Algeria. This new development would likely cause the MNC to _______ ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
its estimate of the previously computed net present value.
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
- lower ||\\|//||
- increase ||\\|//||
- lower, but not necessarily if the mNC invests enough in Algeria to offset the decrease in
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
NPV
- increase, but not necessarily if the MNC reduces its investment in Algeria by an offsetting
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amount - correct answer✔✔lower
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Other tings being equal, firms from a particular home country will engage in more
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international acquisitions if they expect foreign currencies to _______ against their home ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
currency, and if their cost of capital is relatively _________. ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
- appreciate; low
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- appreciate; high
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- depreciate; high
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- depreciate; low - correct answer✔✔appreciate; low
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An MNC's parent would consider investing in a target only if the estimated present value
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
of the cash flows it would ultimately receive from the target over time _____ the initial
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outlay necessary to purchase the target. ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
- is less than
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- is the same as
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- is greater than
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- none of the above - correct answer✔✔is greater than
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