International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Suppose the Australian government has announced tax cuts for the business sector. Using the loanable funds model, explain how this will impact the supply of and demand for loanable funds and the interest rate in Australia.
Explain the differences of two: Domestic Capital Budgeting and Multinational Capital Budgeting
Which of the following investment criteria are commonly used by Canadian firms in their capital budgeting decisions?
Select one:
a. net present value
b. internal rate of return
c. payback period
d. a and b only
e. a, b, and c
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- Capital budgeting for a foreign project is considerably more complex than the domestic case. Discuss FIVE major factors contribute to this greater complexities.arrow_forwardQuestion Which of the statements below is FALSE? A. Multinational capital budgeting is a straightforward application of the Net Present Value (NPV. model with one twist: we can do the analysis in either domestic currency or foreign currency. B. If we are using foreign currency for the NPV decision, all we have to do is restate all the foreign incremental cash flow in terms of future value and use the current exchange rate. C. In conducting a multinational NPV, one must be careful to avoid differences with rounding of exchange rates, discount rates, and cash flow to produce the exact same value. D. With the foreign currency approach in NPV analysis, if we know the appropriate discount rate in the home country and the expected inflation rates in the two countries, we can determine the appropriate foreign discount rate.arrow_forwardConducting monetary policy so that the FF rate = 1.25%, where the FF rate is the nominal federal funds interest rate, is an example of : A. an active policy rule. B. a passive policy rule. C. discretionary policy. D. an automatic stabilizer.arrow_forward
- Monetary policy in Australia is implemented by the Reserve Bank, and currently is principally directed towards: A: affecting the level of short-term interest rates B: effecting a reduction in the current account deficit C: affecting the level of growth in the money supplyarrow_forwardApart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity—influence interest rates. Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false: Statements True False Countries with strong balance sheets and declining budget deficits tend to have lower interest rates. When the economy is weakening, the Fed is likely to increase short-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in the United States.arrow_forwardList some key differences in capital budgeting as applied to foreign versus domesticoperations.arrow_forward
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