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International diversification works best when fore...

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Question

International diversification works best when foreign projects are highly positively correlated over time. True False The Red Tape can be an implicit barrier to the direct foreign investment. True False There are several cost-related motives for the direct foreign investment. One of them is the use of foreign technology. True False A multinational firm conducts country risk analysis when assessing whether to continue conducting business in a particular country. True False There are several techniques to assess country risk. the Delphi technique involves making a judgment on all the political and financial factors. True False Country risk can be divided into the country's political risk and its financial risk. True False A country has a 3.6 of political risk rating with 50% weight and a 4.0 of financial risk rating with 50% weight. Then, the overall weighted country risk rating is 3.8. True False The blockage of fund transfers is one of the political risk factors. True False The direct foreign investment decisions of multinational firms usually involve foreign financial assets rather than foreign real assets. True False Inspection visits for assessing country risk involve meeting with government officials, business executives, and consumers. True False The foreign investment risk matrix shows the financial and political risk by intervals ranging across the matrix from poor to good. True False Any portfolio on the frontier of efficient project portfolios is optimal to all multinational firms. True False Interest rates, inflation rates, and exchange rates are financial risk factors. True False Multinational firms make direct foreign investments by engaging in joint ventures, acquiring foreign firms, and forming foreign subsidiaries. True False Manager may attempt to expand their divisions internationally if their compensation may increase as a result of expansion. This is one of the cost-related motives for the direct foreign investment. True False In some cases, multinational firms use the direct foreign investment to circumvent trade restrictions. True False Country risk can be incorporated in the capital budgeting analysis of a proposed project by adjusting either the discount rate or the estimated cash flows. True False Local governments tend to closely regulate any direct foreign investment that may affect local firms, consumers, and economic conditions. True False The choice of target countries for the direct foreign investment is likely to change over time. True False Many multinational firms do not have a formal method to assess country risk. As a result, they often use a combination of techniques to assess country risk. True False

 

Paper#2751 | Written in 18-Jul-2015

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