International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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The examples below are all examples of a U.S. capital outflow except
a . General Motors invests in an automobile plant in France.
b . Charles Schwab, Inc., invests mutual fund money in the Japanese stock market.
c . All answers are capital outflows.
d . Microsoft opens a new office in Detroit
Big Old Serious Supermarket (BOSS) is a retail company that manages a chain of supermarkets, operating solely in the US market. The company has issued common stock equity and bonds to finance its operations. Those are its only sources of capital.
After the onset of the pandemic and its fallout on the economy, several changes occurred in the US economy and financial markets. What is the potential impact of each one of the following changes on the weighted average cost of capital (WACC) of BOSS? (assume that everything else remains constant.)
i. The US Federal Reserve Bank lowered the reference interest rate.
ii.The annual expected return for the S&P 500, the benchmark index for the US stock market, was revised downwards.
Suppose InBev Corporation (a non-U.S. MNC) buys Anheuser-Busch Corporation (a U.S. corporation) by paying the U.S. shareholders in cash. Which of the following can be said of the US capital account?
Group of answer choices
The acquisition of cash by US shareholders will decrease foreign ownership, which will be recorded as a debit.
The US federal reserve will increase its currency reserves.
InBev's reduction in cash will be recorded as a debit on the U.S. capital account..
InBev's increased ownership of US assets is recorded as a credit.
U.S. shareholders increased ownership in InBev will be recorded as a credit.
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