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IBUS 401 QUIZ 3 Questions With Complete Solutions
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IBUS 401 QUIZ 3 Questions With Complete Solutions
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IBUS 401 QUIZ 3 Questions WithComplete Solutions
When determining whether a particular proposed project in a foreign country is feasible:
a. a country risk rating can adequately substitute for a capital budgeting analysis.
b. country risk analysis should be incorporated within the capital budgeting analysis.
c. the effect of country risk on sales revenue is more important than the effect on cash
flows.
d. the project with the highest country risk rating (lowest country risk) should be
accepted. CORRECT ANSWERS b. country risk analysis should be incorporated within
the capital budgeting analysis.
When quantifying country risk:
A. weights should be equally allocated among factors.
B. weights should be assigned to the political and financial factors according to their
perceived importance.
C. it is not generally necessary to construct separate ratings for political and financial
risk since these will be equally weighed in the final analysis.
D. the derived factors will be identical for all MNCs conducting business in that country.
CORRECT ANSWERS B. weights should be assigned to the political and financial
factors according to their perceived importance.
A mild form of political risk is a tendency of residents to purchase only:
A. imported products.
B. locally produced products.
C. products produced by MNCs.
D. none of the above CORRECT ANSWERS B. locally produced products.
When a foreign currency is perceived by a firm to be undervalued, the firm may
consider direct foreign investment in that country, as the initial outlay should be
relatively low.
, A. True
B. False CORRECT ANSWERS True
Which of the following is a reason to consider international business?
A. economies of scale
B. exploit monopolistic advantages
C. diversification
D. all of the above CORRECT ANSWERS D. all of the above
MNCs commonly consider direct foreign investment because it can improve their
profitability and enhance shareholder wealth.
True or False CORRECT ANSWERS True
If a U.S. parent is setting up a French subsidiary, and funds from the subsidiary will be
periodically sent to the parent, the ideal situation from the parent's perspective is a ____
after the subsidiary is established.
A. strengthening euro
B. stable euro
C. weak euro
D. B and C are both ideal CORRECT ANSWERS A. Strengthening euro
Other things being equal, firms from a particular home country will engage in more
international acquisitions if they expect foreign currencies to ______ against their home
currency, and if their cost of capital is relatively ________
A. appreciate ; low
B. appreciate ; high
C. depreciate; high
D. depreciate; low CORRECT ANSWERS A. appreciate ; low
Assuming that a subsidiary is wholly owned, a subsidiary's perspective is appropriate in
attempting to determine whether a project will enhance the firm's value.
True or False CORRECT ANSWERS False
From an acquirer's perspective, the ideal conditions would be a weak foreign currency
at the time of acquisition and a strengthening of the foreign currency over time as funds
are remitted back to the parent.
True or False CORRECT ANSWERS True
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