International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Which of the following is matter if a U.S. parent firm plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings. The discount rate of the NPV from the project would be affected by ______.
A.
the parent's cost of capital
B.
the sales volume of the subsidiary
C.
the economic conditions
D.
the cost of borrowing
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?
Which of the following is a function of the primary capital market
a.To allow the Foreign Institutional Investors (Fils) to invest in the Indian capital markets
b To allow the companies to raise funds to meet their short term funds requirements through new securities
c. To provide a market for trading with the outstanding long term securities
d. To provide a market for trading with the existing short term securities
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- How may the domestic cost of capital for a foreign venture be adjusted to account for currency rate risk, political risk, and nation risk?arrow_forwardGenerally, is the cost of capital for investing in international countries more or less than investing in domestic countries and explain whyarrow_forwardWhich of the following is a function of the primary capital market a. To allow the Foreign Institutional Investors (FIls) to invest in the Indian capital markets b. To allow the companies to raise funds to meet their short term funds requirements through new securities O c. To provide a market for trading with the outstanding long term securities O d. To provide a market for trading with the existing short term securitiesarrow_forward
- What modifications may be made to the domestic cost of capital for a foreign venture to account for currency rate and political risk?arrow_forwardA U.S. company has the following choices of financial markets in which to raise capital. Which one will it most often prefer? a.foreign bond b.domestic banks c.foreign bank d.a new issue of common stockarrow_forwardQuestion:2 , Which of the following factors are likely to decrease the weighted average cost of capital for a multinational corporation compared to a domestic firm? Check all that apply: Exposure to country risk International diversification Exposure to exchange rate risk Access to international capital markets Large size Submit.............arrow_forward
- Use the Mundell-Fleming model with perfect capital mobility, for each economy, analyze why the effectiveness of monetary, fiscal, and trade policies depend on the exchange rate regime in place in a country.arrow_forwardTo create the global capital structure in a MNC, the business must ________. A. diversify to the oversea markets B. increasing its subsidiary's capital structure C. consolidate all of the foreign subsidiaries' capital structure D. expand competition to the other countriesarrow_forwardShould firms require higher rates of return on foreign projects than on identical projectslocated at home? Explain.arrow_forward
- Which of the following factors is not expected to generally have a favorable impact on the firm's cost of capital? Group of answer choices easy access to international capital markets. high degree of international diversification. high exposure to exchange rate fluctuations. all of thesearrow_forwardPlease help me .... The above figure shows the financial statement of oman's investment copooration the surplus of the profits of the Oman Investment Company over the expenses and costs in the company for a specific period, in general, the cash gains obtained from a deal in 2018. Write an analysis that describes the above figure from the largest ratio to the smallest ratio.arrow_forwardWhy should capital budgeting for subsidiary projects be assessed from the parent’s perspective? What additional factors that normally are not relevant for a purely domestic project deserve consideration in multinational capital budgeting?arrow_forward
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