Quan trong_Multinational financial management_292 -...

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International Economics
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Chapter 11 / Exercise 15
International Economics
Carbaugh
Expert Verified
INTERNATIONAL FINANCIAL MANAGEMENT 1. Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. One year later, the stock rises to £60. You are happy with your 20 percent return on the stock, but when you sell the stock and exchange your £60 for dollars, you only get $45 since the pound has fallen to £1 = $0.75. This loss of value is an example of a. Exchange Rate Risk b. Political Risk c. Market imperfections d. Weakness in the dollar
2. The fundamental goal of sound business management is
3. With regard to the financial structure of foreign subsidiaries
4. When a parent company is willing to let its subsidiary default,
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International Economics
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Chapter 11 / Exercise 15
International Economics
Carbaugh
Expert Verified
5. The cost of capital a. Is defined as K = (1 λ)Kl + λ(1 – t)i b. Is the minimum rate of return an investment project must generate in order to pay its financing costs. c. Is an accounting number reflecting historical costs. d. Is an accounting number reflecting historical costs. None of the above
6. Companies can benefit from cross-border listing of stocks in what ways?
7. A firm that can reduce its cost of capital
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