IBUS 401 TEST 1 Exam || Most Recent Exam 2026-2027
Actual Complete Real Exam Questions And Correct
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Managing economic exposure is generally perceived to
be __________
managing transaction exposure. - ANSWER-
more difficult
As opposed to transaction exposure, managing economic
exposure involves
developing a ________ solution. - ANSWER-
long-term
To hedge translation exposure, MNCs could _______ that their
foreign subsidiaries receive as earnings to create a cash
outflow in the currency to offset the earnings received in that
currency. - ANSWER-sell the currency forward
UVA Co. is a U.S.-based MNC that obtains 40 percent of its
foreign supplies from Thailand. It also borrows Thailand's
currency (the baht) from Thai banks and converts the baht to
dollars to support U.S. operations. It currently receives about
10 percent of its revenue from Thai customers. Its sales to Thai
customers are denominated in baht. Explain how UVA Co. can
,reduce its economic exposure to exchange rate fluctuations. -
ANSWER-UVA Company has periodic outflow payments in Thai
baht that are substantially more than its Thai baht inflow
payments. UVA could reduce its economic exposure by
attempting to increase sales in Thailand, which would generate
additional Thai baht inflows.
Alaska Inc. plans to create and finance a subsidiary in Mexico
that produces computer components at a low cost and exports
them to other countries. It has no other international business.
The subsidiary will produce computers and export them to
Caribbean islands and will invoice the products in U.S. dollars.
The values of the currencies in the islands are expected to
remain very stable against the dollar. The subsidiary will pay
wages, rent, and other operating costs in Mexican pesos. The
subsidiary will remit earnings monthly to the parent.
a. Would Alaska's cash flows be favorably or unfavorably
affected if the
Mexican peso depreciates
over time?
b. Assume that Alaska considers partial financing of this
subsidiary with peso loans from Mexican banks instead of
providing all the financing with its own funds. Would this
alternative form of financing increase, decrease, or have no
effect on the degree to which Al - ANSWER-a. Alaska's cash
flows would be favorably affected, because it has only cash
, outflows in pesos, and can periodically convert dollars to cover
its expenses in pesos.
b. Alaska's subsidiary already has cash outflows in pesos with
no cash inflows in pesos. The partial financing with pesos
would increase the cash outflows in pesos, which results in a
greater exposure to the possible appreciation of the peso.
When a firm analyzes the feasibility of a project, it should
consider the - ANSWER-variability of the project's cash flow
and correlation of the project's cash flow relative to the
prevailing cash flows of the MNC
Consider Firm "A" and Firm "B" that both produce the same
product. Firm "A" would more likely have more stable cash
flows if its percentage of foreign sales
were __________ and the number of foreign countries it sold
products to was
__________. - ANSWER-
higher; large
According to information in the text, a host government would
be least likely to provide incentives for direct foreign
investment (DFI) into its country if the firm planning DFI: -
ANSWER-would compete with local firms of the host country.
A firm will likely benefit most from diversifying if - ANSWER-
the correlations
Actual Complete Real Exam Questions And Correct
Answers (Verified Answers) Already Graded A+ |
Guaranteed Success!! Newest Exam | Just
Released!!
Managing economic exposure is generally perceived to
be __________
managing transaction exposure. - ANSWER-
more difficult
As opposed to transaction exposure, managing economic
exposure involves
developing a ________ solution. - ANSWER-
long-term
To hedge translation exposure, MNCs could _______ that their
foreign subsidiaries receive as earnings to create a cash
outflow in the currency to offset the earnings received in that
currency. - ANSWER-sell the currency forward
UVA Co. is a U.S.-based MNC that obtains 40 percent of its
foreign supplies from Thailand. It also borrows Thailand's
currency (the baht) from Thai banks and converts the baht to
dollars to support U.S. operations. It currently receives about
10 percent of its revenue from Thai customers. Its sales to Thai
customers are denominated in baht. Explain how UVA Co. can
,reduce its economic exposure to exchange rate fluctuations. -
ANSWER-UVA Company has periodic outflow payments in Thai
baht that are substantially more than its Thai baht inflow
payments. UVA could reduce its economic exposure by
attempting to increase sales in Thailand, which would generate
additional Thai baht inflows.
Alaska Inc. plans to create and finance a subsidiary in Mexico
that produces computer components at a low cost and exports
them to other countries. It has no other international business.
The subsidiary will produce computers and export them to
Caribbean islands and will invoice the products in U.S. dollars.
The values of the currencies in the islands are expected to
remain very stable against the dollar. The subsidiary will pay
wages, rent, and other operating costs in Mexican pesos. The
subsidiary will remit earnings monthly to the parent.
a. Would Alaska's cash flows be favorably or unfavorably
affected if the
Mexican peso depreciates
over time?
b. Assume that Alaska considers partial financing of this
subsidiary with peso loans from Mexican banks instead of
providing all the financing with its own funds. Would this
alternative form of financing increase, decrease, or have no
effect on the degree to which Al - ANSWER-a. Alaska's cash
flows would be favorably affected, because it has only cash
, outflows in pesos, and can periodically convert dollars to cover
its expenses in pesos.
b. Alaska's subsidiary already has cash outflows in pesos with
no cash inflows in pesos. The partial financing with pesos
would increase the cash outflows in pesos, which results in a
greater exposure to the possible appreciation of the peso.
When a firm analyzes the feasibility of a project, it should
consider the - ANSWER-variability of the project's cash flow
and correlation of the project's cash flow relative to the
prevailing cash flows of the MNC
Consider Firm "A" and Firm "B" that both produce the same
product. Firm "A" would more likely have more stable cash
flows if its percentage of foreign sales
were __________ and the number of foreign countries it sold
products to was
__________. - ANSWER-
higher; large
According to information in the text, a host government would
be least likely to provide incentives for direct foreign
investment (DFI) into its country if the firm planning DFI: -
ANSWER-would compete with local firms of the host country.
A firm will likely benefit most from diversifying if - ANSWER-
the correlations
