International Financial Management Study Set 9

Countries that became part of the European Union in 2004 had high labor and production costs and therefore were not targeted for new FDI by MNCs that wanted to reduce manufacturing costs.

The best means to accomplish the revenue-related motive of attracting new sources of demand is to:

If countries are highly influential upon each other, the correlations of their economic growth levels would likely be ____. A firm would benefit ____ by diversifying sales among these countries relative to another set of countries that were not influential upon each other.

According to the text, a firm may be able to achieve a 'more efficient' project portfolio if it:

Even if production costs are higher in a foreign country, a UK firm may establish a manufacturing plant in the foreign country now if:

Which of the following is not true regarding the efficient frontier considered by MNCs?

MNCs often attempt to set up production in locations where land and labour are expensive, because expensive factors of production indicate high demand.

Direct foreign investment is perceived by foreign governments to:

To use foreign factors of production, an MNC should:

A firm will likely benefit most from diversifying if:

Some governments restrict foreign ownership of local firms. Such restrictions may limit or prevent international acquisitions.

____ is not a revenue-related motive for direct foreign investment.

In assessing the risk of an individual project, the expected correlation of the new project's returns with those of the prevailing business should be considered.

When considering a major new investment, it is not just the individual risk that is important, but how that risk contributes to the overall risk of the portfolio of projects that a MNC is undertaking.

Direct foreign investment would typically be welcomed if:

When economic conditions of two countries are ____, then a firm would ____ its risk by operating in both countries instead of concentrating just in one.

Assume the correlation coefficient between the returns on the existing project and the return on a proposed foreign project is 1. Also assume the returns on existing project and the new project are equal, and that the existing project has a lower standard deviation than the proposed project. Under this scenario, undertaking the proposed project will ____ the variance of the firm's overall returns.

____ is not a disadvantage of direct foreign investment.

Which of the following is not true regarding host government attitudes towards foreign direct investment (FDI)?

The following data is available for an investment object: Acquisition cost: 60,000 Operating cash flows: 20,000 in year 1; 30,000 in year 2; 35,000 in year 3. Using the NPV model with a discount rate of 10%, which of the following is true?