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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
MORIT, Inc., a U.S. corporation undertakes direct foreign investment in Brazil. The Brazilian real is expected to depreciate temporarily against the dollar. As a result, earnings remitted to MORIT will convert to fewer dollars. For this reason, MORIT may request the subsidiary to:
postpone remitting earnings until the dollar strengthens
postpone remitting earnings until the real strengthens
remit earnings right away before the dollar weakens
all of the above
none of the above
Which of the following is probably the most difficult for a MNC to value?
international acquisition
international divestiture
international partial acquisition
newly privatized foreign business
none of the above
Which strategy is suggested when a company wants to to reduce risk by diversifying internationally?
Establish subsidiaries in markets whose business cycles differ from those where existing subsidiaries are based
Establish subsidiaries in markets that have relatively low cost of labor or land
Establish subsidiaries in markets where the local currency is weak but is expected to appreciate over time
Establish subsidiaries in markets whose business cycles are the same as those where existing subsidiaries are based
None of the above
The Jackson Corporation, a U.S. firm, establishes a subsidiary in a foreign country where it currently doesn't do any business. The present value of cash flows from this subsidiary to the parent is more sensitive to exchange rate movements when:
the parent finances most of the investment
the parent finances the entire investment
the subsidiary finances the entire investment by local borrowing
the subsidiary finances most of the investment by local borrowing
none of the above
MNCs may value the same foreign target company in different ways because of:
Differences in tax rates
Differences in estimated exchange rates
Differences in required rates of return
All of the above
None of the above
Financial characteristics that should be considering in evaluating country risk include:
interest rates
exchange rate
inflation
government fiscal policy
all of the above
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