Question 1

Comprehensive rules, regulations, and incentives aimed at regulating the inflow of direct foreign investments involving MNCs and at extracting more benefits from their presence are termed

Accepted Answer

National entry control systems refer to the comprehensive rules, regulations, and incentives that are aimed at regulating the inflow of direct foreign investments involving MNCs and at extracting more benefits from their presence. These control systems include policies and measures such as foreign ownership restrictions, screening procedures, and approval processes.

Question 2

Which of the following nations has the greatest amount of political risk?

Accepted Answer

South Africa has a higher level of political risk compared to the other nations. The country has a history of political instability, corruption, and social unrest which can potentially affect businesses and investment opportunities. In recent years, there have been concerns over land reforms and the expropriation of land without compensation, adding to the political risk in the country.

Question 3

Canada is a member of the

Accepted Answer

Canada is a member of the North American Free Trade Agreement (NAFTA), which includes Canada, the United States, and Mexico.

Question 4

The__________ method takes all transactions that were measured in a foreign currency and translates them into Canadian dollars using the exchanged rate in effect on the date of the originaltransaction.

Accepted Answer

The method described in the sentence is the temporal method, which uses the exchange rate in effect on the date of the original transaction to translate foreign currency transactions into the reporting currency (in this case, Canadian dollars). Choices A, B, and D do not accurately describe this method.

Question 5

Nexnew Systems Inc. is a Canada-based MNC that manufacturers satellite equipment. of $100,000 before foreign taxes. All after-tax earnings are to be paid to the parent as dividends. The foreign taxes include anincome tax rate of 35 percent and a dividend withholding tax of 15 percent. The firm's marginal tax rate in Canada is 45 percent. The taxes paid to the Canadian government would be

Accepted Answer

The taxes paid to the Canadian government would be $0 because the foreign tax credit for the income tax and withholding tax paid abroad would offset the Canadian tax liability.

Question 6

In terms of inventory, management multinational firms

Accepted Answer

Multinational firms must deal with a wide range of factors when managing their inventory, including exchange rate fluctuations, tariffs, non-tariff barriers, and other rules and regulations. These factors can have significant impacts on the cost, availability, and distribution of inventory across different markets. Therefore, inventory management in multinational firms is a complex and challenging task that requires careful consideration of a variety of economic and political factors.

Question 7

A partnership between a multinational company and a foreign investor in which contractuallyspecified amounts of money and expertise are contributed by the participants for statedproportions of ownership and profit is a

Accepted Answer

A joint venture is a type of partnership between a multinational company and a foreign investor, in which both parties contribute specified amounts of money and expertise and share ownership and profits according to pre-determined proportions. The other options are not accurate descriptions of this type of business arrangement.

Question 8

If $1 Canadian costs $0.80 U.S. and $1 U.S. costs 125 Japanese yen, than $1 Canadian costs ___________Japanese yen.

Accepted Answer

The answer of If $1 Canadian costs $0.80 U.S. and...

Question 9

The existence of__________ allows multinationals to take advantage of unregulated financial marketsto invest and raise short-term funds in a variety of countries and to protect themselves from foreign exchange exposure.

Accepted Answer

Eurocurrency markets refer to the financial markets where currencies are deposited outside of their home country, enabling multinationals to take advantage of unregulated financial markets, invest and raise short-term funds in various countries, and protect themselves from foreign exchange exposure. The International Monetary Fund and the European Economic Council are international organizations, and a strong Canadian dollar does not directly relate to the concept described in the statement.

Question 10

Tanks and Toilets Inc. is a Canada-based MNC that manufacturers stainless steel bathroomfixtures. of $100,000 before foreign taxes. All before-tax earnings are to be paid to the parent as interest. The foreign taxes include an income tax rate of 30 percent and an interest withholding tax of 15 percent. The firm's marginal tax rate in Canada is 45 percent. The amount of tax paid to the Canadian government would be

Accepted Answer

The foreign income tax is $30,000 (30% of $100,000), and the withholding tax is $10,500 (15% of $70,000, which is the remaining amount after income tax). The total foreign taxes paid are $40,500. The Canadian tax liability is $45,000 (45% of $100,000), but the firm can credit the foreign taxes paid, so the tax paid to the Canadian government is $45,000 - $40,500 = $4,500. However, since the question asks for the total tax paid to the Canadian government, it is $30,000, which is the Canadian tax liability after accounting for foreign tax credits.

Question 11

As a foreign exchange hedging tool, options have all of the following characteristics EXCEPT

Accepted Answer

Options do not have an obligation to buy or sell, whereas other hedging tools like forwards and futures do have an obligation.

Question 12

The Euromarket is dominated by the

Accepted Answer

The U.S. dollar is the dominant currency in the Euromarket, which refers to the market for Eurocurrency deposits and loans outside of their domestic borders. The use of the U.S. dollar is due to its stability and widespread use in international trade and finance. While other currencies such as the Deutsche mark and Japanese yen have historically played a role in the Euromarket, the dominance of the U.S. dollar has remained consistent. The French franc is no longer in use since it was replaced by the euro in 1999.

Question 13

Macro political risk and micro political risk in international business refer to the risk

Accepted Answer

Macro political risk refers to political risks that will affect all foreign firms, such as the risk of war or economic sanctions, while micro political risk refers to risks that will only affect an individual firm or specific industry, such as the risk of expropriation or changes in regulations. Therefore, option D accurately reflects this distinction.

Question 14

The center of the Euro-equity market, which deals in international equity issues is

Accepted Answer

The center of the Euro-equity market, which deals in international equity issues, is London.

Question 15

In the international context, the__________interest rate involves only the MNC parent's currency,while the__________ interest rate includes any forecast appreciation or depreciation of a foreigncurrency relative to that of the MNC parent.

Accepted Answer

The nominal interest rate involves only the MNC parent's currency, while the effective interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.

Question 16

A political risk that might affect all foreign firms in a host country is termed a risk; a political risk that might affect only an individual firm or specific industry in a host country is termed a__________ risk.

Accepted Answer

A risk that might affect all foreign firms in a host country is a macro political risk, while a risk that might affect only an individual firm or specific industry in a host country is a micro political risk. Foreign exchange risk is not directly related to political risk.

Question 17

Foreign bonds are sold primarily in

Accepted Answer

The answer of Foreign bonds are sold primarily in
...

Question 18

In capital budgeting for a multinational, the starting discount rate to which risks stemming fromforeign exchange and political factors can be added, and from which benefits reflecting the parent'slower capital costs may be subtracted is

Accepted Answer

The local cost of equity capital reflects the specific business and financial risks in the subsidiary's environment, making it the appropriate starting point for adjustments related to foreign exchange and political risks.

Question 19

Foreign exchange risk refers to the risk created by

Accepted Answer

Foreign exchange risk refers to the risk created by the fluctuation of exchange rates between two currencies, which can result in losses or gains for a company engaged in international trade. Fixed exchange rates (B) may eliminate this risk, but they are rare and have declined in popularity in recent decades. Nationalization or seizure of operations in a host country (C and D) represent political risks, which are different from foreign exchange risk.

Question 20

When fewer units of a foreign currency are required to buy one dollar, the currency is said to have__________with respect to the dollar.

Accepted Answer

When a foreign currency requires fewer units to buy one dollar, it means the foreign currency has increased in value, or appreciated, with respect to the dollar.

Quiz 19: International Corporate Finance