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Question 9 The objective of sensitivity analysis...

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Question 9 The objective of sensitivity analysis in capital budgeting is to determine how sensitive the NPV is to alternative values of the input variables. Answer A. True B. False Question 10 If the parent's government imposes a ____ tax rate on funds remitted from a foreign subsidiary, a project is less likely to be feasible from the ____ point of view. Answer A. high; subsidiary's B. high; parent's C. low; parent's D. A and C E. none of the above Question 11 The international Fisher effect (IFE) suggests that: Answer A. a home currency will depreciate if the current home interest rate exceeds the current foreign interest rate. B. a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate. C. a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate. D. a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate. Question 12 Given a home country and a foreign country, purchasing power parity (PPP) suggests that: Answer A. a home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate. B. a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate. C. a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate. D. a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate. Question 13 According to the IFE, if British interest rates exceed U.S. interest rates: Answer A. the British pound's value will remain constant. B. the British pound will depreciate against the dollar. C. the British inflation rate will decrease. D. the forward rate of the British pound will contain a premium. E. today's forward rate of the British pound will equal today's spot rate. Question 14 Given a home country and a foreign country, purchasing power parity suggests that: Answer A. the inflation rates of both countries will be the same. B. the nominal interest rates of both countries will be the same. C. A and B D. none of the above Question 15 Under purchasing power parity, the future spot exchange rate is a function of the initial spot rate in equilibrium and: Answer A. the income differential. B. the forward discount or premium. C. the inflation differential. D. none of the above Question 16 According to the international Fisher effect, if U.S. investors expect a 5% rate of domestic inflation over one year, and a 2% rate of inflation in European countries that use the euro, and require a 3% real return on investments over one year, the nominal interest rate on one-year U.S. Treasury securities would be: Answer A. 2%. B. 3%. C. ?2%. D. 5%. E. 8%. Question 17 Springfield Co., based in the U.S., has a cost from orders of foreign material that exceeds its foreign revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would ____ a stronger dollar and would ____ a weaker dollar. Answer A. benefit from; be unaffected by B. benefit from; be adversely affected by C. be unaffected by; be adversely affected by D. be unaffected by; benefit from E. benefit from; benefit from Question 18 Managing economic exposure is generally perceived to be ____ managing transaction exposure. Answer A. more difficult than B. less difficult than C. just as difficult as D. none of the above Question 19 An MNC expects to sell fixed assets it utilizes in Europe in the distant future. In order to hedge the sale of these assets in the distant future, the MNC could create a(n) ____ that ____ the expected value of the assets in the future. Answer A. asset; matches B. asset; exceeds C. liability; matches D. liability; is less than Question 20 A foreign subsidiary with more revenue than expenses denominated in a foreign currency will be favorably affected by appreciation of the foreign currency. Answer A. True B. False Question 21 To reduce economic exposure when a foreign currency has a greater impact on cash inflows, an MNC could reduce its level of foreign sales, increase its foreign supply orders, or restructure debt to increase debt payments in the foreign currency. Answer A. True B. False Question 22 John Maynard Keynes was called the father of modern macroeconomics due to his theories that called for Answer A. unfettered markets. B. reliance on the "invisible hand" to lead to societal balance. C. regulated markets. D. socialist financial policies. Question 23 The two contemporary world rulers that led the shift from regulated to free markets were Answer A. Churchill and Stalin B. Regan and Thatcher C. Bush and Brown D. Nixon and Pompidou Question 24 In 1947, economists from around the world met at Mount Pelerin (also known as "Pilgrim Mountain") to Answer A. plan the next session of the G8 economic conference. B. rally the world leaders around the rising tide of regulated markets. C. protest the labeling of Economics as the "Dismal Science". D. develop an intellectual current to offset the world movement towards planned and regulated markets. Question 25 During the 1990's a number of events ocurred concurrently that led to the growth of the "Global Village" of trade and capital. They were ... Answer A. the collapse of the USSR,the end of the cold war, and technology breakthroughs in telecomunication and computers. B. deregulation of the airline industry, declining world oil prices and shift to floating foreign exchange rates. C. cloning was first successfully applied in Scotland, Pokemon became a major fad in the US and Princess Diana died in a car accident in a Paris tunnel. D. the Gulf War (1) started, the republicans took over the House of Representatives (led by Newt Ginrich) and the Oklahoma bombing took place killing 168.

 

Paper#6917 | Written in 18-Jul-2015

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