1. MNCs may undertake overseas investment projects in a foreign country, despite the fact that local firms may enjoy inherent advantages. This implies that ?,A. MNCs are making a mistake in this case and will have to eventually withdraw?,B. MNCs shouldn’t have significant advantages over local firms such as comparative advantages due to intangible assets?,C. The local firms will not have to compete due to their inherent advantages over the foreigners.?,D. None of the above,,2. The key factors that are important in a firm’s decision to invest overseas are: ?,A. Trade barriers, imperfect labor market, and tangible assets?,B. Vertical Integration, product life cycle, and shareholder diversification services?,C. profit maximization, global prestige, and competition?,D. a) and b),,3. Labor services in a country can be severely underpriced relative to its productivity ,?A. Because workers are allowed to freely move across national boundaries to seek higher wages.?,B. Because among all factor markets, the labor market is the most perfect.,?C. Because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences.?,D. All of the above,,4. FDI stocks ,?A. Are the common shares of multinational companies that invest abroad?,B. Are mutual funds that invest in FDI?,C. Represent the accumulation of previous years’ FDI flows,?D. Are the sum total of current year FDI flows,,5. The boomerang effect is,?A. The possibility that FDI in an undeveloped nation will lead to a group of workers who have enough money to afford the firm’s products, leading to an increase of sales and increase of workers and so on.?,B. The possibility that if the secret formula of Coca-Cola were leaked, that other firms would come up with dissimilar products and hurt Coca-Cola’s sales. ,?C. The possibility that FDI in an undeveloped nation will lead to a group of domestic workers no longer have enough money to afford the firm’s products, leading to an decrease of sales.?,D. None of the above,,6. According to the internalization theory of FDI ?,A. Firms that have tangible assets with a public good property tend to invest directly in foreign countries.,?B. Property rights in intangible assets are difficult to establish and protect, especially in foreign countries where legal recourse may not be readily available.?,C. a) and b)?,D. None of the above,,7. An example of forward vertical FDI is?,A. U.S. car makers entered into joint partnerships with car makers in Japan to help sell their cars.?,B. U.S. car makers began to source parts in Japan to lower the cost of their cars.?,C. U.S. car makers built their own network of dealerships in Japan to help buy their cars. ?,D. None of the above,,8. Some of the risks that a U.S. based MNC can encounter in its foreign investments are: ?(i)- an increase in the cost of borrowing due to a rise in interest rates?(ii)- increase in inflation rates?(iii)- dumping?(iv)- unfair competition by local companies?(v)- convertibility of foreign currencies?(vi)- expropriation?(vii)- destruction of properties due to war, revolution, and other violent political events in foreign countries?(viii)- loss of business income due to political violence?In the U.S., the Overseas Private Investment Corporation (OPIC) offers insurance against which of the above: ?,A. (i), (ii), and (iii)?,B. (i), (ii), (iii), and (iv)?,C. (v), (vi), (vii), and (viii)?,D. (vi), (vii) and (viii)?,E. a) and d)?,F. b) and c)?,G. None of the above,,9. Examples of operational risk include ?,A. The unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments.?,B. Unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities.?,C. Restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs.?,D. None of the above,,10. When evaluating a foreign investment project, it is important for the MNC to consider the effect of political risk, as a sovereign country can change "the rules of the game". To account for this: ?,A. The MNC may adjust the cost of capital backward?,B. The MNC may lower the expected cash flows from the foreign project.?,C. The MNC may sell insurance policies against the hazard of political risks.,D. Non of the above,,11. Find the debt-to-value ratio for a firm with a debt-to-equity ratio of ½ ?,A. 1/3?,B. 1/2?,C. 3/5?,D. 2/3?,E. 5/7,,12. Find the weighted average cost of capital for a firm that has a debt-to-equity ratio of 1½, a tax rate of 34%, a levered cost of equity of 12% and an after-tax cost of debt of 8% ??,A. 9.4%?,B. 7.968%?,C. 14%?,D. none of the above,,13. Find the weighted average cost of capital for a firm that has a debt-to-equity ratio of 2, a tax rate of 30%, a levered cost of equity of 11% and a pre-tax cost of debt of 9.21% ??,A. 7.6%?,B. 7.968%?,C. 10%?,D. none of the above,,14. The common stock of Kansas City Power and Light has a beta of 0.80. The Treasury bill rate is 4 percent and the market risk premium is 8 percent. KCP&L is in the 34% tax bracket. What is their cost of equity capital? ??,A. 12.0%?,B. 6.4%?,C. 7.20%?,D. 10.4%,,,19. Assume that ZYX Corporation is a leveraged company with the following information: ??Kl = cost of equity capital for ZYX = 13%?K= weighted average cost of capital for ZYX = 9% ?t = marginal corporate income tax rate = 30%?If ZYX’s debt-to-total-market-value ratio is 40%, then its before-tax borrowing cost, is: ?,A. 4.285%?,B. 5.465%?,C. 10.321%?,D. 60%,20. Assume that the risk-free rate of return is 4%, the systematic risk inherent in the stock of XYZ Corporation is 1.80, and according to the CAPM the expected return of XYZ is 14.8%. Calculate the expected return on the market portfolio.??,A. 10.0%?,B. 12.8%?,C. 16.0%?,D. 16.8%,,NOTE: Please include all the procedure in the ones that need it and also I attached a document with 4 more questions marked in yellow, I need also those ones.
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