Top 250+ Solved International Financial Management MCQ Questions Answer
Q. An international project's NPV is _________ related to the size of the initialinvestment and _________ related to the project's required rate of return.
a. positively; positively
b. positive; negatively
c. negatively; positively
d. negatively; negatively
Q. A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5. The NPV for this project will be higher if the foreign currency _________ in year 1 and _________ in years 2 though 5.
a. depreciates; depreciates
b. appreciates; appreciates
c. depreciates; appreciates
d. appreciates; depreciates
Q. If an MNC sells a product in a foreign country and imports partially manufactured components needed for production to that country from the U.S., then the local economy's inflation will have:
a. a more pronounced impact on revenues than on costs.
b. a less pronounced impact on revenues than on costs.
c. the same impact on revenues as on costs.
d. none of the above
Q. Which of the following is not true regarding a target's previous cash flows?
a. They may serve as an initial base from which future cash flows may be estimated after accounting for other factors.
b. It may be easier to estimate the cash flows to be generated by a target than to estimate the cash flows to be generated from a new foreign subsidiary.
c. They are always good indicators of future cash flows.
d. All of the above are true.
Q. A macro-assessment of country risk:
a. is adjusted for the particular business of the firm involved.
b. excludes all aspects relevant to a particular firm or project.
c. A and B
d. none of the above
Q. The checklist approach:
a. requires several inspections of the country being evaluated.
b. requires the use of discriminant analysis to assess country risk.
c. requires ratings and weights to be assigned to all factors relevant in assessing country risk.
d. involves the collection of independent opinions on country risk.
Q. Insurance purchased to cover the risk of expropriation __________, and will typicallycover __________.
a. will be the same for all firms; only a portion of the firm's total exposure.
b. will be the same for all firms; all of the firm's total exposure.
c. will be dependent on the firm's risk; all of the firm's total exposure.
d. will be dependent on the firm's risk; only a portion of the firm's total exposure.
Q. If a foreign country follows the "Purchase Homemade Products" philosophy, the least effective strategy would be for a UK firm to:
a. use a licensing arrangement with a local firm in that country.
b. enter into a joint venture in that country.
c. develop a subsidiary (under the US name) that manufactures and sells products in that country.
d. develop a subsidiary (under the US name) that manufactures products in that
Q. A firm may incorporate a country risk rating into the capital budgeting analysis by:
a. adjusting the NPV upward if the country risk rating has fallen (implying increased risk) below a benchmark level.
b. adjusting the discount rate upward as the country risk rating decreases (implying increased risk).
c. A and B
d. none of the above
Q. ______________ is(are) not a form of political risk.
a. Exchange rate movements
b. Attitude of consumers in the host country
c. Actions of the host government
d. Blockage of fund transfers
Q. When quantifying country risk:
a. weights should be equally allocated among factors.
b. weights should be assigned to the political and financial factors according to their perceived importance.
c. it is not generally necessary to construct separate ratings for political and financial risk since these will be equally weighed in the final analysis.
d. the derived factors will be identical for all MNCs conducting business in that country.
Q. An argument for MNCs to have a debt-intensive capital structure is:
a. they are well diversified.
b. foreign government tax rules may change over time.
c. exposure to exchange rate fluctuations.
d. exposure to fund blockage.
Q. The capital asset pricing theory is based on the premise that:
a. only unsystematic variability in cash flows is relevant.
b. only systematic variability in cash flows is relevant.
c. both systematic and unsystematic variability in cash flows are relevant.
d. neither systematic nor unsystematic variability in cash flows is relevant.
Q. A primary result of the Bretton Woods Agreement was:
a. the establishment of the European Monetary System (EMS).
b. establishing specific rules for when tariffs and quotas could be imposed by governments.
c. establishing that exchange rates of most major currencies were to be allowed to fluctuate 1% above or below their initially set values.
d. establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without boundaries (although the central banks did have the right to intervene when necessary).
Q. Assume that a bank's bid rate on Swiss francs is £0.25 and its ask rate is £0.26. Itsbid-ask percentage spread is:
a. 4.00%.
b. about 3.85%.
c. 4.26%.
d. about 4.17%.