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