,TESTBANK FOR International Financial Management 15th Edition Madura
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
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editions.
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,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
True / False
1. A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and
possibly an initial investment in a franchise in exchange for periodic fees.
a. True
b. False
ANSWER: False
2. Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in
exchange for fees or some other specified benefits.
a. True
b. False
ANSWER: True
3. Franchising is the process by which national governments sell state-owned operations to corporations and other
investors.
a. True
b. False
ANSWER: False
4. The parent of an MNC can implement compensation plans that directly reward the subsidiary managers for enhancing
the value of the MNC.
a. True
b. False
ANSWER: True
5. If a publicly traded MNC's managers make poor decisions that reduce its value, that may encourage other firms to
acquire the MNC.
a. True
b. False
ANSWER: True
6. Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not
normally want to take control of it and therefore have no influence over management of the MNC.
a. True
b. False
ANSWER: False
7. Imperfect markets reflect conditions under which factors of production are immobile.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
8. The Sarbanes-Oxley Act (SOX), enacted in 2002, required MNCs and other firms to implement an internal reporting
process that could be easily monitored by executives and the board of directors.
a. True
b. False
ANSWER: True
9. If markets were perfect, then labor and other costs of production would be perfectly stable (no movement across
borders).
a. True
b. False
ANSWER: False
10. The valuation of an MNC is reduced if the required rate of return on its investments in foreign countries is reduced.
a. True
b. False
ANSWER: False
11. The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.
a. True
b. False
ANSWER: True
12. A centralized management style, where major decisions about a foreign subsidiary are made by the parent company,
results in an increase in agency costs.
a. True
b. False
ANSWER: False
13. If a U.S. firm sets up a plant in Mexico to benefit from low-cost labor, it will likely have a comparative advantage
over other firms in Mexico that sell the same product.
a. True
b. False
ANSWER: False
14. Although MNCs may need to convert currencies occasionally, they do not face any exchange rate risk, as exchange
rates are stable over time.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
15. One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency
problems.
a. True
b. False
ANSWER: True
16. A centralized management style for an MNC results in relatively high agency costs when compared to a decentralized
management style.
a. True
b. False
ANSWER: False
17. The imperfect markets theory states that factors of production are somewhat immobile, allowing firms to capitalize on
a foreign country's resources.
a. True
b. False
ANSWER: True
18. If a U.S.-based MNC focused entirely on importing, then its valuation would likely be adversely affected if most
currencies were expected to appreciate against the dollar over time.
a. True
b. False
ANSWER: False
19. MNCs commonly consider acquiring an existing foreign operation because it is less expensive than establishing a new
subsidiary of the same size.
a. True
b. False
ANSWER: False
20. If a U.S.-based MNC focused entirely on exporting, then its valuation would likely be adversely affected if most
currencies were expected to appreciate against the dollar over time.
a. True
b. False
ANSWER: False
21. If markets were perfect, then labor and other costs of production would be easily transferable.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
22. The valuation of an MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows
remitted by the subsidiaries.
a. True
b. False
ANSWER: False
23. A microeconomic perspective focuses on external forces such as economic conditions that can affect the value of an
MNC.
a. True
b. False
ANSWER: False
24. Assume that an MNC has a subsidiary in Italy, which exports its products to various countries in Europe. Since all of
the countries where it exports use the euro as their currency, this MNC is not subject to exchange rate risk.
a. True
b. False
ANSWER: False
25. A decentralized management style results in relatively high agency costs for an MNC.
a. True
b. False
ANSWER: True
26. MNCs commonly consider establishing a new foreign subsidiary to replace their exporting business because it allows
them to avoid exchange rate risk.
a. True
b. False
ANSWER: False
27. A macroeconomic perspective focuses on the investment and financing decisions that affect the value of an MNC.
a. True
b. False
ANSWER: False
28. In determining the valuation of foreign projects, an MNC will use the same required rate of return as it would for its
domestic projects.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
29. A U.S.-based MNC having many foreign subsidiaries in Europe and not expecting to increase its investment there
should see its value increase if the value of the euro weakens over time.
a. True
b. False
ANSWER: False
30. If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they
automatically maximize the value of the entire corporation.
a. True
b. False
ANSWER: False
31. A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary,
may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's
operations.
a. True
b. False
ANSWER: True
32. U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold
stock in MNCs.
a. True
b. False
ANSWER: False
33. The Sarbanes-Oxley Act requires a more transparent process for managers to report on the productivity and financial
condition of their firm.
a. True
b. False
ANSWER: True
34. The theory of comparative advantage begins by assuming that a given firm first becomes established in its home
country and may subsequently penetrate foreign markets via geographic or product differentiation.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
35. Under the imperfect markets theory, it is assumed that factors of production are entirely mobile, so that firms can
capitalize on a foreign country's resources.
a. True
b. False
ANSWER: False
36. Under the product cycle theory, foreign demand can be initially satisfied by exporting.
a. True
b. False
ANSWER: True
37. Licensing allows firms to use their technology in foreign markets without a major investment in foreign countries.
a. True
b. False
ANSWER: True
38. International trade is the most common form of direct foreign investment (DFI).
a. True
b. False
ANSWER: False
39. When the parent's home currency is weak, remitted funds from foreign subsidiaries will convert to a smaller amount
of the home currency.
a. True
b. False
ANSWER: False
40. A purely domestic firm may be affected by exchange rate fluctuations if it faces at least some foreign competition.
a. True
b. False
ANSWER: True
41. One form of exposure to political risk is terrorism.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
Multiple Choice
42. The commonly accepted goal of an MNC is to:
a. maximize short-term earnings.
b. maximize shareholder wealth.
c. minimize risk.
d. maximize international sales.
ANSWER: b
43. With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is
mostly concerned with maximizing ____.
a. shareholder wealth; short-term earnings
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
d. short-term earnings; shareholder wealth
ANSWER: b
44. How do agency costs for an MNC compare to those of a purely domestic firm?
a. The MNC has zero cost.
b. An MNC’s costs are greater.
c. An MNC’s costs are smaller.
d. Their costs are the same.
ANSWER: b
45. Which of the following forms of corporate control could reduce agency problems for an MNC?
a. stock options as managerial compensation
b. hostile takeover threat
c. investor monitoring
d. All of these choices are correct.
ANSWER: d
46. The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to
____ and when the foreign currencies denominating these cash flows are expected to ____.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
ANSWER: b
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
47. Which of the following theories identifies specialization as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: a
48. Which of the following theories identifies the nontransferability of resources as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: b
49. Which of the following theories suggests that firms seek to penetrate new markets over time?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: c
50. An industry based on which of the following would most likely take advantage of lower costs in some less developed
foreign countries?
a. assembly line production
b. specialized professional services
c. nuclear missile programs
d. development of more sophisticated computer technology
ANSWER: a
51. Due to the risks involved in international business, firms should:
a. only consider international business in major countries.
b. maintain international business to no more than 20% of total business.
c. maintain international business to no more than 35% of total business.
d. consider and assess each type of risk.
ANSWER: d
Copyright Cengage Learning. Powered by Cognero. Page 8
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
Contact Email:
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
True / False
1. A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and
possibly an initial investment in a franchise in exchange for periodic fees.
a. True
b. False
ANSWER: False
2. Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in
exchange for fees or some other specified benefits.
a. True
b. False
ANSWER: True
3. Franchising is the process by which national governments sell state-owned operations to corporations and other
investors.
a. True
b. False
ANSWER: False
4. The parent of an MNC can implement compensation plans that directly reward the subsidiary managers for enhancing
the value of the MNC.
a. True
b. False
ANSWER: True
5. If a publicly traded MNC's managers make poor decisions that reduce its value, that may encourage other firms to
acquire the MNC.
a. True
b. False
ANSWER: True
6. Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not
normally want to take control of it and therefore have no influence over management of the MNC.
a. True
b. False
ANSWER: False
7. Imperfect markets reflect conditions under which factors of production are immobile.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
8. The Sarbanes-Oxley Act (SOX), enacted in 2002, required MNCs and other firms to implement an internal reporting
process that could be easily monitored by executives and the board of directors.
a. True
b. False
ANSWER: True
9. If markets were perfect, then labor and other costs of production would be perfectly stable (no movement across
borders).
a. True
b. False
ANSWER: False
10. The valuation of an MNC is reduced if the required rate of return on its investments in foreign countries is reduced.
a. True
b. False
ANSWER: False
11. The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.
a. True
b. False
ANSWER: True
12. A centralized management style, where major decisions about a foreign subsidiary are made by the parent company,
results in an increase in agency costs.
a. True
b. False
ANSWER: False
13. If a U.S. firm sets up a plant in Mexico to benefit from low-cost labor, it will likely have a comparative advantage
over other firms in Mexico that sell the same product.
a. True
b. False
ANSWER: False
14. Although MNCs may need to convert currencies occasionally, they do not face any exchange rate risk, as exchange
rates are stable over time.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
15. One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency
problems.
a. True
b. False
ANSWER: True
16. A centralized management style for an MNC results in relatively high agency costs when compared to a decentralized
management style.
a. True
b. False
ANSWER: False
17. The imperfect markets theory states that factors of production are somewhat immobile, allowing firms to capitalize on
a foreign country's resources.
a. True
b. False
ANSWER: True
18. If a U.S.-based MNC focused entirely on importing, then its valuation would likely be adversely affected if most
currencies were expected to appreciate against the dollar over time.
a. True
b. False
ANSWER: False
19. MNCs commonly consider acquiring an existing foreign operation because it is less expensive than establishing a new
subsidiary of the same size.
a. True
b. False
ANSWER: False
20. If a U.S.-based MNC focused entirely on exporting, then its valuation would likely be adversely affected if most
currencies were expected to appreciate against the dollar over time.
a. True
b. False
ANSWER: False
21. If markets were perfect, then labor and other costs of production would be easily transferable.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
22. The valuation of an MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows
remitted by the subsidiaries.
a. True
b. False
ANSWER: False
23. A microeconomic perspective focuses on external forces such as economic conditions that can affect the value of an
MNC.
a. True
b. False
ANSWER: False
24. Assume that an MNC has a subsidiary in Italy, which exports its products to various countries in Europe. Since all of
the countries where it exports use the euro as their currency, this MNC is not subject to exchange rate risk.
a. True
b. False
ANSWER: False
25. A decentralized management style results in relatively high agency costs for an MNC.
a. True
b. False
ANSWER: True
26. MNCs commonly consider establishing a new foreign subsidiary to replace their exporting business because it allows
them to avoid exchange rate risk.
a. True
b. False
ANSWER: False
27. A macroeconomic perspective focuses on the investment and financing decisions that affect the value of an MNC.
a. True
b. False
ANSWER: False
28. In determining the valuation of foreign projects, an MNC will use the same required rate of return as it would for its
domestic projects.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
29. A U.S.-based MNC having many foreign subsidiaries in Europe and not expecting to increase its investment there
should see its value increase if the value of the euro weakens over time.
a. True
b. False
ANSWER: False
30. If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they
automatically maximize the value of the entire corporation.
a. True
b. False
ANSWER: False
31. A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary,
may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's
operations.
a. True
b. False
ANSWER: True
32. U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold
stock in MNCs.
a. True
b. False
ANSWER: False
33. The Sarbanes-Oxley Act requires a more transparent process for managers to report on the productivity and financial
condition of their firm.
a. True
b. False
ANSWER: True
34. The theory of comparative advantage begins by assuming that a given firm first becomes established in its home
country and may subsequently penetrate foreign markets via geographic or product differentiation.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
35. Under the imperfect markets theory, it is assumed that factors of production are entirely mobile, so that firms can
capitalize on a foreign country's resources.
a. True
b. False
ANSWER: False
36. Under the product cycle theory, foreign demand can be initially satisfied by exporting.
a. True
b. False
ANSWER: True
37. Licensing allows firms to use their technology in foreign markets without a major investment in foreign countries.
a. True
b. False
ANSWER: True
38. International trade is the most common form of direct foreign investment (DFI).
a. True
b. False
ANSWER: False
39. When the parent's home currency is weak, remitted funds from foreign subsidiaries will convert to a smaller amount
of the home currency.
a. True
b. False
ANSWER: False
40. A purely domestic firm may be affected by exchange rate fluctuations if it faces at least some foreign competition.
a. True
b. False
ANSWER: True
41. One form of exposure to political risk is terrorism.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
Multiple Choice
42. The commonly accepted goal of an MNC is to:
a. maximize short-term earnings.
b. maximize shareholder wealth.
c. minimize risk.
d. maximize international sales.
ANSWER: b
43. With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is
mostly concerned with maximizing ____.
a. shareholder wealth; short-term earnings
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
d. short-term earnings; shareholder wealth
ANSWER: b
44. How do agency costs for an MNC compare to those of a purely domestic firm?
a. The MNC has zero cost.
b. An MNC’s costs are greater.
c. An MNC’s costs are smaller.
d. Their costs are the same.
ANSWER: b
45. Which of the following forms of corporate control could reduce agency problems for an MNC?
a. stock options as managerial compensation
b. hostile takeover threat
c. investor monitoring
d. All of these choices are correct.
ANSWER: d
46. The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to
____ and when the foreign currencies denominating these cash flows are expected to ____.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
ANSWER: b
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Chapter 1 Multinational Financial Management An Overview
47. Which of the following theories identifies specialization as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: a
48. Which of the following theories identifies the nontransferability of resources as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: b
49. Which of the following theories suggests that firms seek to penetrate new markets over time?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: c
50. An industry based on which of the following would most likely take advantage of lower costs in some less developed
foreign countries?
a. assembly line production
b. specialized professional services
c. nuclear missile programs
d. development of more sophisticated computer technology
ANSWER: a
51. Due to the risks involved in international business, firms should:
a. only consider international business in major countries.
b. maintain international business to no more than 20% of total business.
c. maintain international business to no more than 35% of total business.
d. consider and assess each type of risk.
ANSWER: d
Copyright Cengage Learning. Powered by Cognero. Page 8
