MCQ QUESTIONS



Third Assignment

1. Which of the following is not an advantage of international acquisitions over the establishment of a new subsidiary?

a.

The firm can immediately expand its international business.

b.

An international acquisition typically generates quicker cash flows than the establishment of a new subsidiary.

c.

International acquisitions are generally cheaper than the establishment of a new subsidiary.

d.

An international acquisition typically generates larger cash flows than the establishment of a new subsidiary.

e.

All of the above are advantages of international acquisitions.

2. Which of the following tax-related factors need not be considered in assessing a foreign target?

a.

corporate tax rates in the host country.

b.

withholding tax rates in the host country.

c.

withholding tax rates in the home country.

d.

corporate tax rates in the home country.

e.

all of the above must be considered in assessing a foreign target.

3. Other things being equal, a foreign subsidiary in China would more likely be divested by the U.S. parent if new information caused the parent to suddenly anticipate that:

a.

the Chinese yuan would depreciate in the future.

b.

the Chinese yuan would appreciate in the future.

c.

the Chinese yuan would remain somewhat stable in the future.

d.

none of the above; the value of the Chinese yuan has no impact on the feasibility of a divestiture.

4. An MNC's parent would consider investing in a target only if the estimated present value of the cash flows it would ultimately receive from the target over time ____ the initial outlay necessary to purchase the target.

a.

is less than

b.

is the same as

c.

is greater than

d.

none of the above

5. If the foreign currency ____ by the time the acquirer makes payment, the acquisition will be more costly, and the cost of the acquisition changes ____ the change in the exchange rate.

a.

appreciates; by a lesser percentage then

b.

depreciates; in the same proportion as

c.

appreciates; in the same proportion as

d.

appreciates; by a greater percentage than

6. If an MNC targets a successful foreign company with plans to continue the target's local business in a more efficient manner, the risk of the business will be relatively ____, and therefore the MNC's required return from acquiring the target will be relatively ____.

a.

high; high

b.

high; low

c.

low; high

d.

low; low

7. Which of the following is not an advantage of international acquisitions over the establishment of a new subsidiary?

a.

The firm can immediately expand its international business.

b.

The firm benefits from existing customer relationships.

c.

International acquisitions are generally cheaper than the establishment of a new subsidiary.

d.

An international acquisition typically generates quicker and larger cash flows than the establishment of a new subsidiary.

e.

All of the above are advantages of international acquisitions.

8. An MNC valuing a foreign target for acquisition purposes must account for all of the following, except:

a.

The foreign exchange rate.

b.

Withholding taxes imposed by the host government.

c.

Blocked-funds restrictions.

d.

Income taxes imposed by the U.S. government.

e.

An MNC must account for all of the above.

9. Insurance purchased to cover the risk of expropriation ____, and will typically cover ____.

a.

will be the same for all firms; only a portion of the firm's total exposure.

b.

will be the same for all firms; all of the firm's total exposure.

c.

will be dependent on the firm's risk; all of the firm's total ...