国际金融International Finance Test Bank_01

1. The commonly accepted goal of the MNC is to: amaximize short-term earnings. . bmaximize shareholder wealth. . cminimize risk. . dA and C. . emaximize international sales. .

ANS: B PTS: 1

2. With regard to corporate goals, an MNC is mostly concerned with maximizing

____, and a purely domestic firm is mostly concerned with maximizing ____. ashareholder wealth; short-term earnings . bshareholder wealth; shareholder wealth . cshort-term earnings; sales volume . dshort-term earnings; shareholder wealth .

ANS: B PTS: 1

3. For the MNC, agency costs are typically: anon-existent. . blarger than agency costs of a small purely domestic firm. . csmaller than agency costs of a small purely domestic firm. . dthe same as agency costs of a small purely domestic firm. .

ANS: B PTS: 1

4. Which of the following could reduce agency problems for an MNC? astock options as managerial compensation. . bhostile takeover threat. . cinvestor monitoring. . dall of the above are forms of corporate control that could reduce . agency problems for an MNC.

ANS: D PTS: 1

5. The valuation of an MNC should rise when an event causes the expected cash

flows from foreign to ____ and when foreign currencies denominating these cash flows are expected to ____. adecrease; appreciate . bincrease; appreciate . cdecrease; depreciate . dincrease; depreciate .

ANS: B PTS: 1

6. Which of the following theories identifies specialization as a reason for interna-tional business? atheory of comparative advantage. . bimperfect markets theory. . cproduct cycle theory. . dnone of the above .

ANS: A PTS: 1

7. Which of the following theories identifies the non-transferability of resources as a

reason for international business? atheory of comparative advantage. . bimperfect markets theory. . cproduct cycle theory. . dnone of the above .

ANS: B PTS: 1

8. Which of the following theories suggests that firms seek to penetrate new markets

over time? atheory of comparative advantage. . bimperfect markets theory. . cproduct cycle theory. . dnone of the above .

ANS: C PTS: 1

9. Which of the following industries would most likely take advantage of lower costs

in some less developed foreign countries? aassembly line production. . bspecialized professional services. . cnuclear missile planning. . dplanning for more sophisticated computer technology. .

ANS: A PTS: 1

10. Due to the risks involved in international business, firms should: aonly consider international business in major countries. . bmaintain international business to no more than 20% of total business. . cmaintain international business to no more than 35% of total business. . dnone of the above .

ANS: D PTS: 1

13. The agency costs of an MNC are likely to be lower if it: ascatters its subsidiaries across many foreign countries. . bincreases its volume of international business. . cuses a centralized management style. . dA and B. .

ANS: C PTS: 1

14. An MNC may be more exposed to agency problems if most of its shares are held

by: aa few mutual funds . ba widely dispersed set of individual investors . ca few pension funds . dall of the above would prevent agency problems .

ANS: B PTS: 1

15. The Sarbanes-Oxley Act improves corporate governance of MNCs because it: amakes executives more accountable for verifying financial statements . beliminates stock options as a form of compensation . cties executive compensation to firm performance . dplaces a limit on the amount of funds that managers can spend .

ANS: A PTS: 1

16. MNCs can improve their internal control process by all of the following, except: aestablishing a centralized data base of information . bensuring that all data are reported consistently among subsidiaries . censuring that the MNC always borrows from countries where interest . rates are lowest dusing a system that checks internal data for unusual discrepancies .

ANS: C PTS: 1

21. In comparing exporting to direct foreign investment (DFI), an exporting operation

will likely incur ____ fixed production costs and ____ transportation costs than DFI. ahigher; higher . bhigher; lower . clower; lower . dlower; higher .

ANS: D PTS: 1

22. Which of the following is an example of direct foreign investment? aexporting to a country. . bestablishing licensing arrangements in a country. . cpurchasing existing companies in a country. . dinvesting directly (without brokers) in foreign stocks. .

ANS: C PTS: 1

23. According to the text, a disadvantage of licensing is that: ait prevents a firm from importing. . bit is difficult to ensure quality control of the production process. . cit prevents a firm from exporting. . dnone of the above .

ANS: B PTS: 1

24. ____ are most commonly classified as a direct foreign investment. aForeign acquisitions . bPurchases of international stocks . cLicensing agreements . dExporting transactions .

ANS: A PTS: 1

29. Which of the following is not mentioned in the text as an additional risk resulting

from international business? aexchange rate fluctuations. . bpolitical risk. . cinterest rate risk. . dexposure to foreign economies. .

ANS: C PTS: 1

30. Licensing obligates a firm to provide ____, while franchising obligates a firm to

provide ____. aa specialized sales or service strategy; its technology . bits technology; a specialized sales or service strategy . cits technology; its technology . da specialized sales or service strategy; a specialized sales or service . strategy eits technology; an initial investment .

ANS: B PTS: 1

31. Which of the following is not a way in which agency problems can be reduced

through corporate control? aexecutive compensation. . bthreat of hostile takeover. . cacquisition of a foreign subsidiary. . dmonitoring by large shareholders. .

ANS: C PTS: 1

43. International trade: ais a relatively conservative approach to foreign market penetration. . bentails minimal risk. . cdoes not require large amount of investment. . dall of the above. .

ANS: D PTS: 1

44. 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? aInternational Trade . bLicensing . cFranchising . dDirect foreign investment .

ANS: D PTS: 1

45. The valuation of MNC accounts for all the cash flows received by the foreign

subsidiaries plus all the cash flows remitted by the subsidiaries. a. True b. False

ANS: F PTS: 1

46. The MNC's value depends on all of the following, except: aMNC's required rate of return . bAmount of MNC's cash flows in particular currency . cThe exchange rate at which cash flows are converted to dollars . dThe value of MNC depends on all of the above factors .

ANS: D PTS: 1

47. Which of the following is not an example of political risk? aGovernment may impose taxes on subsidiary . bGovernment may impose barriers on subsidiary . cConsumers may boycott the MNC . dConsumers' income levels will decrease, thus decreasing consump-. tion.

ANS: D PTS: 1

50. International trade generally results in ____ exposure to international political risk

and ____ exposure to international economic conditions, when compared to other methods of international business. ahigher; lower . bhigher; higher . clower; higher . dlower; lower .

ANS: D PTS: 1

51. Assume that Boca Co. wants to expand its business to Japan, and wants complete

control over the operations in Japan. Which method of international business is most appropriate for Boca Co? aJoint venture . bLicensing . cPartial acquisition of existing Japanese firm . dEstablishment of Japanese subsidiary .

ANS: B PTS: 1

. Assume that Live Co. has expected cash flows of $200,000 from domestic

operations, SF200,000 from Swiss operations, and 150,000 euros from Italian op-erations at the end of the year. The Swiss franc's value and euro's value are ex-pected to be $.83 and $1.29 respectively, at the end this year. What are the ex-pected dollar cash flows of Live Co? a$200,000 . b$559,500 . c$582,500 . d$393,500 .

ANS: B PTS: 1

55. Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be

received in the future from this subsidiary have not changed since last month, but the valuation of Saller Co. has declined since last month. What could've caused this decline in value? aA weaker Mexican economy . bLower Mexican interest rates . cDepreciation of the Mexican peso . dAppreciation of the Mexican peso. .

ANS: C PTS: 1

56. Jensen Co. wants to establish a new subsidiary in Mexico that will sell computers

to Mexican customers and remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso ____ while it establishes the new subsidiary and ____ when the subsidiary starts operations. adepreciates; appreciates . bappreciates; appreciates . cappreciates; depreciates . ddepreciates; depreciates .

ANS: A PTS: 1

59. 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$200,000 . c$160,000 . d$60,000 .

ANS: C PTS: 1

73. The goal of a multinational corporation (MNC) is aThe minimization of taxes remitted from foreign subsidiaries. . bThe establishment of subsidiaries in any country where operations . would provide a return over and above the cost of capital, even if bet-ter projects are available domestically. cThe maximization of shareholder wealth. . dThe maximization of social benefits resulting from actions such as the . employment of foreign managers.

ANS: C PTS: 1

74. Agency costs faced by multinational corporations (MNCs) may be larger than

those faced by purely domestic firms because aMonitoring of managers located in foreign countries is more difficult. . bForeign subsidiary managers raised in different cultures may not fol-. low uniform goals. cMNCs are relatively large. . dAll of the above . eA and B only .

ANS: D PTS: 1

75. Which of the following is not one of the more common methods used by MNCs to

improve their internal control process? aEstablishing a centralized database of information . bEnsuring that all data are reported consistently among subsidiaries . cSpeeding the process by which all departments and all subsidiaries . have access to the data that they need dMaking executives more accountable for financial statements by per-. sonally verifying their accuracy eAll of the above are common methods used by MNCs to improve . their internal control process.

ANS: E PTS: 1

76. Which of the following is not mentioned in the text as a theory of international

business? aTheory of Comparative Advantage . bImperfect Markets Theory . cProduct Cycle Theory . dGlobalization of Business Theory . eAll of the above are mentioned in the text as theories of international . business

ANS: D PTS: 1

77. The most risky method(s) by which firms conduct international business is (are): aFranchising. . bThe acquisitions of existing operations. . cThe establishment of new subsidiaries. . dAll of the above . eB and C only .

ANS: E PTS: 1

78. The least risky method by which firms conduct international business is: aFranchising. . bThe acquisitions of existing operations. . cInternational Trade. . dThe establishment of new subsidiaries. . eLicensing .

ANS: C PTS: 1

79. Which of the following does not constitute a form of direct foreign investment? aFranchising . bInternational trade . cJoint ventures . dAcquisitions of existing operations . eEstablishment of new foreign subsidiaries .

ANS: B PTS: 1