International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Which of the following is an example of managing economic exposure by flexible sourcing policy?
An American company sells its products in Brazil and Portugal. Reduced sales in Brazil due to the dollar appreciation against the “real” can be compensated by increased sales in Portugal due to the dollar depreciation against the euro.
If yen is strong, it is preferable for a Japanese company to open a manufacturing subsidiary in the U.S. to produce and sell its products there.
An American IT company hires software developers in Ukraine because of the weak position of grivna against dollar.
A Canadian company spends a lot of money for research & development activities to improve its reputation and gain more customers.
Determine the key reasons why a multinational corporation might decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low. Provide support for your rationale.
What impact does foreign investment have on the weighted average cost of capital calculations?
Consider Firm A and Firm B that both produce the same product. Firm A would more likely have more stable cash flows if its percentage of foreign sales were ____ and the number of foreign countries it sold products to was ____.
A.
higher; small
B.
lower; small
C.
higher; large
D.
higher; large
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- Global Giant, a multinational corporation, has a producing subsidiary in a low-tax rate country and a marketing subsidiary in a high-tax country. If Global Giant wants to minimize its worldwide tax liability, we would expect Global Giant to ________. A. stop producing in the low tax rate country B. stop marketing in the high tax rate country C. establish a low transfer price when the producing unit sells to the marketing unit D. establish a high transfer price when the producing unit sells to the marketing unitarrow_forwardUsually, as a manager of an international business, he should understand that the cost of capital of the developing economies is ____ compared to the developed economies. A. uncertain B. lower C. similar D. higherarrow_forwardRecently, it was announced that two giant French retailers, Carrefour SA and Promodes SA, would merge. A headline in the Wall Street Journal blared, “French Retailers Create New Wal-Mart Rival.” While Wal-Mart’s total sales would still exceed those of the combined company, Wal-Mart’s international sales are far less than those of the combined company. This is a serious concern for Wal-Mart, since its primary opportunity for future growth lies outside of the United States.Below are basic financial data for the combined corporation (in euros) and Wal-Mart (in U.S. dollars) in a recent year. Even though their results are presented in different currencies, by employing ratios we can make some basic comparisons.arrow_forward
- Following an unanticipated dollar appreciation, would you recommend that a domestic manufacturing company such as Cummins Engine sell foreign assets? Yes or Noarrow_forwardSaltwater Logistics Corp.’s domestic demand has matured and leveled off. Consequently, the firm is looking to expand its operations overseas because it believes that its growth opportunities are more promising in foreign markets.arrow_forward
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