Chapter 14 - Chapter 14 Financing Foreign Investment 1. *...

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Chapter 14 Financing Foreign Investment 1. Internal sources of funds available for foreign investment do not include . A. the parent equity contributions B. the parent direct loans C. funds provided by operations from retained earnings D. intersubsidiary fund transfers * E. commercial bank loans 2. Many multinational companies are reluctant to make large equity investments in their foreign subsidiaries because . A. dividends to foreign shareholders are normally subject to local income taxes B. dividends to foreign shareholders are usually subject to withholding taxes C. dividends to foreign shareholders are usually subject to foreign exchange risk D. an equity investment is not very flexible for the investor * E. all of the above 3. Parent loans to foreign subsidiaries are usually more popular than equity contributions because . * A. parent loans give a parent company greater flexibility in repatriating funds B. interest payments on intracompany loans are not tax deductible in the host country C. intracompany loans require cumbersome paperwork D. intracompany loans carry high interest rates E. none of the above 4. When a foreign subsidiary has difficulty in borrowing money, a parent may provide its subsidiary a loan guarantee through the following form(s) . A. the parent may sign a purchase agreement to buy its subsidiary's promissory note from the lender B. the parent may guarantee a specific loan agreement C. the parent may guarantee all loans to the subsidiary * D. all of the above E. none of the above 5. Many foreign subsidiaries in developing countries are not always free to remit their earnings in hard currency mainly because . * A. many developing countries do not have sufficient international reserves B. foreign subsidiaries want to retain earnings for current operations C. foreign subsidiaries do not want to repatriate earnings to their parent D. subsidiary managers want to maximize their own cash flows E. the parent company wants its subsidiaries to have financial stability
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6. Loans from sister subsidiaries are considered to be . * A. an internal source of funding B. an external source of funding C. an external source of borrowing D. a form of cash dividends E. none of the above 7. External sources of funds for the multinational company include . A. joint ventures with local investors B. borrowing from banks in the parent country C. bank loans from the host country D. loans from the host government * E. all of the above 8. Bank overdrafts in international financing have the following feature(s) . * A.
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Chapter 14 - Chapter 14 Financing Foreign Investment 1. *...

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