TB14 - Chapter 14 Multinational Capital Budgeting 1 If a...

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Chapter 14 Multinational Capital Budgeting 1. If a U.S. parent is setting up a French subsidiary, and funds from the subsidiary will be periodically sent to the parent, the ideal situation from the parent’s perspective is a _______ after the subsidiary is established. A) strengthening euro B) stable euro C) weak euro D) stable and weak euro ANSWER: A 2. According to the text, in order to develop a distribution of possible net present values from international projects, a firm should use: 3. When evaluating international project cash flows, which of the following factors is relevant? 4. When assessing a German project administered by a German subsidiary of a U.S.-based MNC solely from the German subsidiary’s perspective, which variable will most likely influence the capital budgeting analysis? 39
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40 International Financial Management 5. In capital budgeting analysis, the use of a cumulative NPV is useful for: A) determining a probability distribution of NPVs. B) determining the time required to achieve a positive NPV. C) determining how the required rate of return changes over time. D) determining how the cost of capital changes over time. E) determining a probability distribution of NPVs AND determining the time required to achieve a positive NPV. ANSWER: B 6. Assume the parent of a U.S.-based MNC plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings in U.S. operations. According to the text, the discount rate used in the capital budgeting analysis on this project should be most affected by: 7. Assume a U.S.-based MNC has a Chilean subsidiary that annually remits 30 million Chilean pesos to the U.S. If the peso _______, the dollar amount of remitted funds _______.
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