IBUS 401 Exam 3 Latest Update 2025-2026 100
Questions and 100% Verified Correct Answers
Guaranteed A+
_____ is an input required for a multinational capital budgeting analysis, given that it is
conducted from the parent's viewpoint.
a. Salvage value
b. Price per unit sold
c. Initial investment
d. Consumer demand
e. All of the above are inputs requires for capital budgeting analysis. - CORRECT
ANSWER: e. All of the above are inputs requires for capital budgeting analysis.
A country with high unemployment could best increase its employment by:
(a) encouraging foreign firms to establish subsidiaries that produce the same products
local firms produce
(b) encouraging foreign firms to establish licensing arrangements for products local
firms produce
(c) encouraging foreign firms to establish subsidiaries that produce products local firms
do not produce
(d) non of the above would reduce unemployment - CORRECT ANSWER: (c)
encouraging foreign firms to establish subsidiaries that produce products local firms do
not produce
A firm may incorporate a country risk rating into the capital budgeting analysis by:
(a) adjusting the NPV if the country rating has fallen (implying increased risk) below a
benchmark level
(b) adjusting the discount rate upward as the country risk increases
(c) A and B
,(d) non of the above - CORRECT ANSWER: (b) adjusting the discount rate upward as
the country risk increases
A firms' cost of _____ reflects an opportunity cost: what the existing shareholders could
have earned if they had received the earnings as dividends and invested the funds
themselves - CORRECT ANSWER: retained earnings
A foreign project generates a negative cash flow in year 1 and positive cash flows in
years 2 through 5. The NPV for this project will be higher if the foreign currency ____ in
year 1 and ____ in years 2 through 5. - CORRECT ANSWER: depreciates; appreciates
A previously undertaken project in a foreign country may no longer be feasible because:
(a) interest rates have declined
(b) the MNC's cost of capital has decreased
(c) the host gov't has increased its tax rates substantially
(d) exchange rate projections changed from a depreciation to an appreciation of the
foreign currency - CORRECT ANSWER: (c) the host gov't has increased its tax rates
substantially
A U.S. based MNC has just established a subsidiary in Algeria. Shortly after the plant
was built, the MNC determines that its exchange rate forecasts, which had previously
indicated a slight appreciation in the Algerian dinar, were probably false. Instead of a
slight appreciation, the MNC now expects that the dinar will depreciate substantially due
to political turmoil in Algeria. This new development would likely cause the MNC to
_____ its estimate of the previously computed net prevent value - CORRECT
ANSWER: lower
According to the CAPM< the required rate of return on stock is a positive function of all
the following except:
(a) the risk-free rate of interest
(b) the market rate of return
(c) the stock's beta
, (d) the company's earnings - CORRECT ANSWER: (d) the company's earnings
According to the information in the text, a host gov't would be least likely to provide
incentives for direct foreign investment (DFI) into its country if the firm planning DFI: -
CORRECT ANSWER: would compete with local firms of the host country
According to the text, a firm may be able to achieve a "more efficient" project portfolio,
moving the available project frontier out, if it :
(a) focuses solely on one product
(b) focuses solely on one location to market what it produces
(c) A and B
(d) none of the above - CORRECT ANSWER: (d) none of the above
According to the text, MNCs can:
(a) use only debt financing in foreign countries to support foreign subsidiaries
(b) use only equity financing in foreign countries to support foreign subsidiaries
(c) use only parent financing in foreign countries to support foreign subsidiaries
(d) none of the above - CORRECT ANSWER: (d) none of the above
According to the text, the most appropriate method of incorporating country risk into
capital budgeting analysis is to: - CORRECT ANSWER: estimate the effect of each
form of country risk on cash flows
An interest rate swap between two firms of different countries enables the exchange of
_____ for _____.
a. fixed rate payments; floating rate payments
b. stock; interest deduction on taxes
c. interest payments on loans; ownership of debt of less developed countries
Questions and 100% Verified Correct Answers
Guaranteed A+
_____ is an input required for a multinational capital budgeting analysis, given that it is
conducted from the parent's viewpoint.
a. Salvage value
b. Price per unit sold
c. Initial investment
d. Consumer demand
e. All of the above are inputs requires for capital budgeting analysis. - CORRECT
ANSWER: e. All of the above are inputs requires for capital budgeting analysis.
A country with high unemployment could best increase its employment by:
(a) encouraging foreign firms to establish subsidiaries that produce the same products
local firms produce
(b) encouraging foreign firms to establish licensing arrangements for products local
firms produce
(c) encouraging foreign firms to establish subsidiaries that produce products local firms
do not produce
(d) non of the above would reduce unemployment - CORRECT ANSWER: (c)
encouraging foreign firms to establish subsidiaries that produce products local firms do
not produce
A firm may incorporate a country risk rating into the capital budgeting analysis by:
(a) adjusting the NPV if the country rating has fallen (implying increased risk) below a
benchmark level
(b) adjusting the discount rate upward as the country risk increases
(c) A and B
,(d) non of the above - CORRECT ANSWER: (b) adjusting the discount rate upward as
the country risk increases
A firms' cost of _____ reflects an opportunity cost: what the existing shareholders could
have earned if they had received the earnings as dividends and invested the funds
themselves - CORRECT ANSWER: retained earnings
A foreign project generates a negative cash flow in year 1 and positive cash flows in
years 2 through 5. The NPV for this project will be higher if the foreign currency ____ in
year 1 and ____ in years 2 through 5. - CORRECT ANSWER: depreciates; appreciates
A previously undertaken project in a foreign country may no longer be feasible because:
(a) interest rates have declined
(b) the MNC's cost of capital has decreased
(c) the host gov't has increased its tax rates substantially
(d) exchange rate projections changed from a depreciation to an appreciation of the
foreign currency - CORRECT ANSWER: (c) the host gov't has increased its tax rates
substantially
A U.S. based MNC has just established a subsidiary in Algeria. Shortly after the plant
was built, the MNC determines that its exchange rate forecasts, which had previously
indicated a slight appreciation in the Algerian dinar, were probably false. Instead of a
slight appreciation, the MNC now expects that the dinar will depreciate substantially due
to political turmoil in Algeria. This new development would likely cause the MNC to
_____ its estimate of the previously computed net prevent value - CORRECT
ANSWER: lower
According to the CAPM< the required rate of return on stock is a positive function of all
the following except:
(a) the risk-free rate of interest
(b) the market rate of return
(c) the stock's beta
, (d) the company's earnings - CORRECT ANSWER: (d) the company's earnings
According to the information in the text, a host gov't would be least likely to provide
incentives for direct foreign investment (DFI) into its country if the firm planning DFI: -
CORRECT ANSWER: would compete with local firms of the host country
According to the text, a firm may be able to achieve a "more efficient" project portfolio,
moving the available project frontier out, if it :
(a) focuses solely on one product
(b) focuses solely on one location to market what it produces
(c) A and B
(d) none of the above - CORRECT ANSWER: (d) none of the above
According to the text, MNCs can:
(a) use only debt financing in foreign countries to support foreign subsidiaries
(b) use only equity financing in foreign countries to support foreign subsidiaries
(c) use only parent financing in foreign countries to support foreign subsidiaries
(d) none of the above - CORRECT ANSWER: (d) none of the above
According to the text, the most appropriate method of incorporating country risk into
capital budgeting analysis is to: - CORRECT ANSWER: estimate the effect of each
form of country risk on cash flows
An interest rate swap between two firms of different countries enables the exchange of
_____ for _____.
a. fixed rate payments; floating rate payments
b. stock; interest deduction on taxes
c. interest payments on loans; ownership of debt of less developed countries
