22 roreign direct investmen. ertaken via: e) baying sustantisl degree of the equ

Question

22 roreign direct investmen. ertaken via: e) baying sustantisl degree of the equity capital of a foreign company d) can only be done when a foreign subsidiary is buit up from seratch 23. The following are barriers to trade excep a) Tarifts e) Telecommuunications d) Import taxes 24. The cost of capital is a) b) the minimum, rate of return an investment project must gener te ln order to financing eals. the minimum rate of return an investment project must generate in order to pay its financing costs plus reasonable profit. the maximum rate of return an investment project must generate in order to pay its financing costs c) d the maximum rate of return an investment project must generate in order to pay its financing costs plus a reasonable profit. 25. When making a capital budgeting decision the ultimate decision depends on: a) the APV from the parent's perspective. b) the APV from the subsidiary's perspective. c) the APV from the competitor's perspective d) none of these. True/False 26. The biggest advantage of the current rate method of reporting translation adjustments is the fact that the gain or loss goes directly to the reserve account on the consolidated balance sheet and does not pass through the consolidated income statement A. TRUE B. FALSE 27. It is possible that efforts to decrease translation exposure may result in an increase in transaction exposure A. TRUE B. FALSE 28. Unexpected changes in exchange rates is never good news for a firm's operating income A. TRUE B. FALSE 29. Currency swaps are exclusively for periods of time under one year. A. TRUE B. FALSE . For purposes of international capital budgeting, evaluation of a project from the PARENT viewpoint serves useful purposes, but it should be subordinated to evaluation from the LOCAL's viewpoint. A. TRUE Transaction exposure measures gains or losses that arise from the settlement of existing financial obligations B. FALSE whose terms are stated in a foreign currency. TRUEB. FALSE

Explanation / Answer

22 (d) can only be done when a foreign subsidary is built from scratch

23 (c) Telecommunications

24 (a) Minimum rate of return an investment project must generate in order to pay its financing costs

25 (a) APV from the parent's perspective

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