Reference no: EM132014416

Cash flows for a foreign project will be in the foreign currency while the discount rate is usually evaluated from the domestic currency perspective. Which one of the following is a method for resolving the problem?

A. Engage in arbitrage to make up for any potential foreign exchange losses

B. Convert all cash flows from the foreign currency in question to another foreign currency

C. Convert the domestic discount rate to an equivalent in the foreign currency

D. Use purchasing power parity to determine the discount rate

Multinational corporations primarily invest their capital in

A. licensing agreements with firms that have products they want to offer.

B. joint ventures with firms that have operations in countries where they want to do business.

C. direct ownership of assets to produce products and services in multiple countries.

D. franchising ventures in countries where they have business operations.

If the current spot exchange rate is $0.9744 Canadian buys $1 U.S. and inflation is expected to be 1 percent over the next year in the United States with the Canadian inflation rate expected to be 5 percent over the same period, what would the exchange rate be at the end of the year using the relative form of the PPP equation?

A. $0.9922 Canadian

B. $1.0234 Canadian

C. $0.9844 Canadian

D. $0.9373 Canadian

If the current spot exchange rate is $0.9744 Canadian buys $1 U.S. and inflation is expected to be 1 percent over the next year in the United States with the Canadian inflation rate expected to be 5 percent over the same period, what would the exchange rate be at the end of the year using the relative form of the PPP equation?

A. $0.9922 Canadian

B. $1.0234 Canadian

C. $0.9844 Canadian

D. $0.9373 Canadian

Which of the following is not one of the basic approaches used in monitoring company managers to minimize the impact of the agency problem?

A. Appoint an ethics specialist to the board of directors

B. Make the managers owners

C. Ignore it if the amount of money involved is negligible

D. Monitor managers' actions

Tax _______ is commonly a tax consideration motivating a merger.

A. gains from unused debt capacity

B. gains from increased operating income

C. losses from surplus funds

D. gains from paying down debt