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Question 1

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  2. ;

    International governance is achieved by all of

    the following except:

    Answer

    poison
    pills.

    board of
    directors.

    institutional
    investors.

    blockholders.

1 points ;

Question 2


  2. ;

    Which of the following types of international

    corporate control transaction is probably the most difficult to value by an

    MNC?

    Answer

    international
    acquisition.

    newly privatized foreign
    business.

    international
    alliance.

    international
    divestiture.

1 points ;

Question 3


  2. ;

    When an MNC assesses targets among countries,

    it would prefer a country where the growth potential for its industry is ____

    and the competition within the industry is ____.

    Answer

    low; not
    excessive

    high;
    excessive

    high; not
    excessive

    low;
    excessive

1 points ;

Question 4


  2. ;

    Other things being equal, a foreign subsidiary

    in China would more likely be divested by the U.S. parent if new information

    caused the parent to suddenly anticipate that:

    Answer

    the Chinese yuan would depreciate
    in the future.

    the Chinese yuan would appreciate
    in the future.

    the Chinese yuan would remain
    somewhat stable in the future.

    none of the above; the value of the
    Chinese yuan has no impact on the feasibility of a
    divestiture.

1 points ;

Question 5


  2. ;

    If an MNC targets a successful foreign company

    with plans to continue the target’s local business in a more efficient manner,

    the risk of the business will be relatively ____, and therefore the MNC’s

    required return from acquiring the target will be relatively

    ____.

    Answer

    high; high

    high; low

    low; high

    low;
    low

1 points ;

Question 6


  2. ;

    Firms based in ____ tend to acquire more U.S.

    target firms than the other countries listed here.

    Answer

    Canada

    Japan

    Germany

    Mexico

1 points ;

Question 7


  2. ;

    Which of the following tax-related factors

    need not be considered in assessing a foreign target?

    Answer

    corporate tax rates in the host
    country.

    withholding tax rates in the host
    country.

    withholding tax rates in the home
    country.

    corporate tax rates in the home
    country.

1 points ;

Question 8


  2. ;

    According to your text, U.S. firms pursue more

    international acquisitions in ____ than in other

    countries.

    Answer

    the U.K.

    Mexico

    Japan

    Germany

    France

1 points ;

Question 9


  2. ;

    An international alliance typically requires a

    ____ initial outlay than an international acquisition, and the cash flows to be

    received will typically be ____ than the cash flow resulting from an

    international acquisition.

    Answer

    smaller;
    larger

    smaller;
    smaller

    larger;
    smaller

    larger;
    larger

1 points ;

Question 10


  2. ;

    Based on information in your text, all of the

    following factors should be considered in an international acquisition,

    except:

    Answer

    the target’s willingness to be
    acquired.

    the target’s previous acquisition
    history.

    the target’s previous cash
    flows.

    the target’s local economic
    conditions.

1 points ;

Question 11


  2. ;

    If the foreign currency ____ by the time the

    acquirer makes payment, the acquisition will be more costly, and the cost of the

    acquisition changes ____ the change in the exchange

    rate.

    Answer

    appreciates; by a lesser percentage
    then

    depreciates; in the same proportion
    as

    appreciates; in the same proportion
    as

    appreciates; by a greater
    percentage than

1 points ;

Question 12


  2. ;

    Which of the following factors is least likely

    to cause the required rate of return to vary among MNCs assessing the same

    foreign target?

    Answer

    differences in the timing of
    remittances from the target to the parent.

    differences in the desired use of
    the target.

    differences in the local risk-free
    interest rate.

    differences in the ability to use
    financial leverage.

1 points ;

Question 13


  2. ;

    Potential targets in countries where economic

    conditions are ____ are more likely to experience strong demand for their

    products in the future and may generate ____ cash

    flows.

    Answer

    strong;
    lower

    weak;
    higher

    weak; lower

    strong;
    higher

1 points ;

Question 14


  2. ;

    The valuation of a newly privatized business

    is generally more difficult than the valuation of a publicly traded firm

    because:

    Answer

    It has previously operated in
    environments of very high competition.

    Interest rates in the countries
    where privatization takes place are extremely high.

    The stock markets in the countries
    where privatization takes place are overvalued.

    Economic conditions in the
    countries where privatization takes place are very
    uncertain.

1 points ;

Question 15


  2. ;

    According to your text, all of the following

    are factors to be considered in an international acquisition,

    except

    Answer

    the target’s willingness to be
    acquired.

    the target’s previous acquisition
    history.

    the target’s previous cash
    flows.

    the target’s local economic
    conditions.

1 points ;

Question 16


  2. ;

    To best reduce exposure to a host government

    takeover, a subsidiary could:

    Answer

    use a long-run profit perspective
    for business in that country.

    hire people from its own country
    (where the parent is located).

    attempt to obtain supplies from its
    parent for which substitutes are not available.

    borrow funds from its parent rather
    than from the host country’s
    creditors.

1 points ;

Question 17


  2. ;

    An MNC considers direct foreign investment in

    Germany. It is mainly concerned with the subsidiary’s ability to generate

    sufficient sales there. The country risk characteristic that would best address

    this concern is:

    Answer

    the host government’s tax rates
    charged on remitted earnings.

    the possibility of blocked
    funds.

    the state of the economy in
    Germany.

    the possibility of a withholding
    tax imposed by the German
    government.

1 points ;

Question 18


  2. ;

    When quantifying country

    risk:

    Answer

    weights should be equally allocated
    among factors.

    weights should be assigned to the
    political and financial factors according to their perceived
    importance.

    it is not generally necessary to
    construct separate ratings for political and financial risk since these will be
    equally weighed in the final analysis.

    the derived factors will be
    identical for all MNCs conducting business in that
    country.

1 points ;

Question 19


  2. ;

    ____ is (are) not a form of political

    risk.

    Answer

    Exchange rate
    movements

    Attitude of consumers in the host
    country

    Actions of the host
    government

    Blockage of fund
    transfers

1 points ;

Question 20


  2. ;

    The ____ involves the collection of

    independent opinions on country risk without group discussion by the assessors

    who provide these opinions.

    Answer

    checklist
    approach

    discriminant
    analysis

    regression
    analysis

    Delphi
    technique

1 points ;

Question 21


  2. ;

    An MNC has a foreign manufacturing plant to

    capitalize on cheap production costs; the MNC exports all the goods produced. It

    should be most concerned about the country’s:

    Answer

    growth in gross domestic
    product.

    government policies designed to
    increase tariffs on imported goods.

    local consumer purchasing
    habits.

    government environmental
    regulations and taxes on the lease or purchase of a production
    site.

1 points ;

Question 22


  2. ;

    If a foreign country’s consumers tend to only

    purchase products that are produced locally, the least effective strategy for a

    U.S. firm is to:

    Answer

    use a licensing arrangement with a
    local firm in that country.

    enter into a joint venture in that
    country.

    develop a subsidiary (under the
    U.S. name) that manufactures and sells products in that
    country.

    develop a subsidiary (under the
    U.S. name) that manufactures products in that country and exports them to border
    countries.

1 points ;

Question 23


  2. ;

    ____ is not a political risk

    factor.

    Answer

    High interest rates in a foreign
    country

    Currency
    inconvertibility

    War

    Corruption

1 points ;

Question 24


  2. ;

    A ____ currency may ____ the volume of

    products imported by the country and therefore reduce the country’s production

    and national income.

    Answer

    weak;
    increase

    weak;
    reduce

    strong;
    increase

    strong;
    reduce

1 points ;

Question 25


  2. ;

    When determining whether a particular

    proposed project in a foreign country is feasible:

    Answer

    a country risk rating can
    adequately substitute for a capital budgeting analysis.

    country risk analysis should be
    incorporated within the capital budgeting analysis.

    the effect of country risk on
    sales revenue is more important than the effect on cash
    flows.

    the project with the highest
    country risk rating (lowest country risk) should be
    accepted.

1 points ;

Question 26


  2. ;

    Which of the following is not a way in which

    country risk analysis can be used?

    Answer

    to monitor countries where an MNC
    is currently doing business.

    as a screening device to avoid
    conducting business in countries with excessive risk.

    to revise an MNC’s financing
    decisions.

    to determine the degree to which
    the MNC is exposed to exchange rate
    movements.

1 points ;

Question 27


  2. ;

    Which of the following is not a technique to

    assess country risk?

    Answer

    Gamma
    technique.

    Delphi
    technique.

    checklist
    approach.

    inspection
    visits.

1 points ;

Question 28


  2. ;

    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

    fall; fall

    rise; fall

    fall;
    rise

1 points ;

Question 29


  2. ;

    According to the text, the most appropriate

    method of incorporating country risk into capital budgeting analysis is

    to:

    Answer

    compare each form of a country
    risk rating to a benchmark level.

    estimate the effect of each form
    of country risk on cash flows.

    estimate the effect of each form
    of country risk on the income statement and balance
    sheet.

    adjust the discount rate to
    reflect the level of country risk using the conventional adjustment formula that
    is used by virtually all
    MNCs.

1 points ;

Question 30


  2. ;

    The checklist

    approach:

    Answer

    requires several inspections of
    the country being evaluated.

    requires the use of discriminant
    analysis to assess country risk.

    requires ratings and weights to be
    assigned to all factors relevant in assessing country
    risk.

    involves the collection of
    independent opinions on country risk.

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