國際金融學(xué)練習(xí)題：Lecture 12

Lecture12(Chapter16)ForeignDirectInvestmentandCross-BorderAcquisitions

True/FalseQuestions

1.

Intheearly1980s,Honda,theJapaneseautomobilecompany,builtanassemblyplantinMarysville,Ohio,andbegantoproducecarsfortheNorthAmericanmarket.AstheproductioncapacityattheOhioplantexpanded,HondabegantoexportitsU.S.-manufacturedcarstoJapan.

True

False

2.

ShareholdersofU.S.bidders(acquiringfirmsinM&A)experiencesignificantpositiveabnormalreturnswhenfirmsexpandintonewindustriesandgeographicmarkets.

True

False

3.

ShareholdersofU.S.targetsexperiencehigherwealthgainswhentheyareacquiredbyforeignfirmsthanwhenacquiredbyU.S.firms.

True

False

4.

Cross-borderacquisitionsaregenerallyfoundtobesynergy-generatingcorporateactivities.

True

False

MultipleChoiceQuestions

5.

Undera1981VoluntaryTradeAgreementJapaneseautomobilemanufacturerswerenotallowedtoincreasetheirexportstotheU.S.market.Asaresult

A.

theyexitedthemarket.

B.

Hondawasmotivatedtocircumventthetradebarriers.

C.

Honda'sFDImayhavebeenpartofanoverallcorporatestrategydesignedtobolstertheircompetitivepositionvis-à-vistheirdomesticrivalssuchasToyota.

D.

bothb)andc)

6.

FollowingHonda'sFDIintheU.S.,

A.

TheU.S.governmentimposedaVoluntaryTradeAgreementunderwhichJapaneseautomobilemanufacturerswerenotallowedtoincreasetheirexportstotheU.S.market.

B.

ToyotaandNissanmadedirectinvestmentsinAmerica.

C.

SalesofHondasdeclined.

D.

noneoftheabove

7.

Honda'sdecisiontobuildaplantinOhio

A.

waswelcomedbytheUnitedAutoWorkers.

B.

wasencouragedbyassistancefromthestateofOhio,includingimprovedinfrastructurearoundtheplantandabatementofpropertytaxes.

C.

involvedsettingupaspecialforeigntradezonethatallowedHondatoimportautopartsfromJapanatareducedtariffrate.

D.

alloftheabove

8.

WhenfirmsundertakeFDI,

A.

theybecomeMNCs.

B.

theyreducetheirtaxratesincetheycantelleachcountrythattheydobusinessinthattheypaidtheirtaxesinothercountries.

C.

thecanexploitworkersbypayingthembelow-marketwagesindepreciatingcurrencies.

D.

alloftheabove

9.

PriortoHonda'sdecisiontobuildaplantinOhio,

A.

theJapanesegovernmenthadbeenurgingtheautomobilecompaniestobeginproductionintheUnitedStates.

B.

theJapanesegovernmenthadbeenurgingtheautomobilecompaniestokeepproductioninJapan.

C.

theJapanesegovernmentimposedimportquotasonU.S.-madeautomobiles.

D.

noneoftheabove

10.

FDIcantaketheformof

A.

Greenfieldinvestment.

B.

cross-borderM&A.

C.

establishingnewproductionfacilitiesinaforeigncountry.

D.

alloftheabove

11.

TheFordMotorCompanyrecentlyacquiredMazda,aJapaneseautomaker,andJaguar,aBritishautomaker.

A.

Thisisanexampleofcross-borderM&A.

B.

ThiswasaGreenfieldinvestment.

C.

botha)andb)

D.

noneoftheabove

12.

Firmsbecomemultinational

A.

whentheyundertakeforeigndirectinvestments(FDI).

B.

withtheestablishmentofnewproductionfacilitiesinforeigncountriessuchasHonda'sOhioplant.

C.

whentheybecomeinvolvedinmergerswithandacquisitionsofexistingforeignbusinesses.

D.

alloftheabove

13.

TheUnitedStatesisthelargestinitiator,ofFDI.ThelargestrecipientofFDIis

A.

alsotheUnitedStates.

B.

France.

C.

Germany.

D.

China.

E.

noneoftheabove

14.

AccordingtoarecentUNsurvey,theworldFDIstockgrewatwhatraterelativetoworldwideexportsofgoodsandservices?

A.

TheworldFDIstockgrewtwiceasfastasworldwideexportsofgoodsandservices.

B.

TheworldFDIstockgrewatthesamerateasworldwideexportsofgoodsandservices.

C.

TheworldFDIstockgrewhalfasfastasworldwideexportsofgoodsandservices.

D.

Noneoftheabove

15.

Duringthefive-yearperiod2004-2008,totalannualworldwideFDIoutflowsamountedto

A.

About$1,423milliononaverage.

B.

About$1,423billiononaverage.

C.

About$1,423trilliononaverage.

D.

Noneoftheabove

16.

Duringthefive-yearperiod2004-2008,

A.

ChinareceivedthelargestamountofFDIinflows.

B.

IndiareceivedthelargestamountofFDIinflows.

C.

MexicoreceivedthelargestamountofFDIinflows.

D.

theUnitedStatesreceivedthelargestamountofFDIinflows.

17.

JapanplaysamajorroleasanexporterofFDI.AsarecipientofFDI,

A.

JapanreceivesasmuchFDIasitexports,makingitamajorplayeronbothfronts.

B.

Japanplaysarelativelyminorrole,reflectingavarietyoflegal,economic,andculturalbarrierstoFDI.

C.

Japan'sreceiptsofFDIarethirdintheworld.

D.

Noneoftheabove

18.

MNCsmighthavebeenluredtoinvestinChinanotonlybylowerlaborandmaterialcostsbutalso

A.

byChina'slowerlaborandmaterialcosts.

B.

bythedesiretopreempttheentryofrivalsintoChina'spotentiallyhugemarket.

C.

bytheKungPaochicken.

D.

bythedesiretosee,ifnotbuy,alltheteainChina.

19.

ThethirdmostimportanthostcountryforFDIis

A.

theUnitedStates.

B.

Japan.

C.

China.

D.

Mexico.

20.

MNCshaveinvestedinChina

A.

bylowermaterialcosts.

B.

bylowerlaborcosts.

C.

byadesiretopreempttheentryofrivalsintoChina'spotentiallyhugemarket.

D.

alloftheabove

21.

FDIstocks

A.

arethecommonsharesofmultinationalcompaniesthatinvestabroad.

B.

aremutualfundsthatinvestinFDI.

C.

representtheaccumulationofpreviousyears'FDIflows.

D.

atthesumtotalofcurrentyearFDIflows.

22.

ThedominantsourceofFDIoutflows

A.

severaldevelopedcountries.

B.

afewunderdevelopedcountriesnexttowealthyneighbors,likeMexico.

C.

AfricaandChina.

D.

noneoftheabove

23.

Alternativestofirmslocatingproductionoverseasinclude

A.

exportingfromthehomecountry.

B.

licensingproductiontoalocalfirminthehostcountry.

C.

ignoringtheforeignmarket.

D.

alloftheabove

24.

Thekeyfactorsthatareimportantinafirm'sdecisiontoinvestoverseasare

A.

tradebarriers,imperfectlabormarket,andintangibleassets.

B.

verticalintegration,productlifecycle,andshareholderdiversificationservices.

C.

profitmaximization,globalprestige,andcompetition.

D.

botha)andb)

25.

Whydofirmslocateproductionoverseasratherthanexportingfinishedgoods?

A.

Shippingcosts

B.

Firmsseektoextendcorporatecontroloverseas

C.

Imperfectfactormarkets

D.

Alloftheabove

26.

Unlikethetheoryofinternationaltradeorthetheoryofinternationalportfolioinvestment,

A.

wedonothaveawell-developed,comprehensivetheoryofFDI.

B.

thecomprehensivetheoryofFDIfocusesonmean-varianceefficiency.

C.

thecomprehensivetheoryofFDIisanarbitrageargument,likeinterestrateparity.

D.

noneoftheabove

27.

WhilethereisnocomprehensivetheoryofFDI,manyexistingtheoriesemphasize

A.

imperfectionsinproductmarkets.

B.

imperfectionsincapitalmarkets.

C.

imperfectionsinlabormarkets.

D.

alloftheabove

28.

Internationalmarketsforgoodsandservicesareoftenimperfect.WhichistheMOSTcommonandMOSTimportant?

A.

Actsofgovernments

B.

Naturalbarrierslikedistance

C.

Culturalbarriers

D.

Lackofknowledge

29.

Whydogovernmentsregulateinternationaltrade?

A.

Toraiserevenue

B.

Protectdomesticindustries

C.

Pursueothereconomicobjectives

D.

Alloftheabove

30.

Governmentsregulateinternationaltrade

A.

toraiserevenue(e.g.throughtariffs).

B.

toprotectdomesticindustries.

C.

topursueothereconomicpolicyobjectives(e.g.NorthKoreaforgoingtrade).

D.

alloftheabove

31.

Aclassicexamplefortradebarrier-motivatedFDIis

A.

Honda'sinvestmentinOhio.

B.

Bridgestone'sinvestmentinJapan.

C.

NAFTA.

D.

Noneoftheabove

32.

Suchproductsasmineraloreandcementthatareheavyorbulkyrelativetotheireconomicvalues

A.

maybesuitableforexportingbecausehightransportationcostswillbeovercomebyhighprofitmarginsinoligopolisticindustries.

B.

havehigh"value-to-weightratios"thatprotectprofitmargins.

C.

maynotbesuitableforexportingbecausehightransportationcostswillsubstantiallyreduceprofitmargins.

D.

noneoftheabove

33.

Tradebarrierscanarisenaturally.Whichofthefollowingarenaturalbarrierstotrade?

A.

Transportationcosts

B.

Quotas

C.

Tariffs

D.

Transactionscosts

34.

InapushtoservetheNorthAmericanmarketSamsung,aKoreanfirm,chosetolocateproductionfacilitiesinMexico,mainlybecause

A.

oflowerlaborcostsinMexico.

B.

tocircumventtradebarriersimposedbyNAFTA.

C.

ofcolderweatherinCanada.

D.

noneoftheabove

35.

Laborservicesinacountrymightbeunderpricedrelativetoproductivitybecause

A.

workersarenotallowedtofreelymoveacrossnationalboundariestoseekhigherwages.

B.

somecountriesdoabadjobofeducatingtheirworkforce,consequentlytheyarenotveryproductive.

C.

insomecountriesthereisashortageofcapitalinvestment.

D.

alloftheaboveareequallyimportant

36.

Laborservicesinacountrycanbeseverelyunderpricedrelativetoitsproductivity

A.

becauseworkersarenotallowedtofreelymoveacrossnationalboundariestoseekhigherwages.

B.

becauseamongallfactormarkets,thelabormarketisthemostimperfect.

C.

becauseworkersmaychoosetonotmoveacrossnationalboundariestoseekhigherwagesduetotheculturaldifferences.

D.

alloftheabove

37.

Severeimperfectionsinthelabormarketleadtopersistentwagedifferentialsamongcountries.Someexplanationsinclude

A.

becauseworkersarenotallowedtofreelymoveacrossnationalboundariestoseekhigherwages.

B.

becauseworkersmaychoosetonotmoveacrossnationalboundariestoseekhigherwagesduetotheculturaldifferences.

C.

butthesedifferencesareoffsetbylowproductivityinlowlaborcostcountries.

D.

botha)andb)

38.

Factorsofproductionincludeland,labor,capital,andentrepreneurialability.Ofallthefactormarkets,theMOSTIMPERFECTisthe

A.

labormarket.

B.

capitalmarket.

C.

realestatemarket.

D.

marketforentrepreneurialability.

39.

Severeimperfectionsinthelabormarketleadto

A.

persistentwagedifferentialsamongcountries.

B.

persistentexchangeratevolatilityamongcountries.

C.

persistentinterestratedifferentialsamongcountries.

D.

noneoftheabove

40.

Severeimperfectionsinthelabormarketarisefromimmobilityofworkersduetoimmigrationbarriers.Asaresponse,firmsshouldconsider

A.

movingtotheworkers.

B.

movingtocountrieswherelaborservicesarethelowestinabsoluteterms.

C.

movingtocountrieswherelaborservicesareunderpricedrelativetoproductivity.

D.

hiringillegalimmigrants.

41.

Coca-Colahasinvestedinbottlingplantsallovertheworldratherthanlicensinglocalfirms

A.

becausetheforeignerscan'tbetrustedtofollowthesecretrecipe.

B.

becauseCoca-Colawantedtoprotecttheformulaforitsfamoussoftdrink.

C.

becauseoftheinternalizationtheoryofFDI.

D.

bothb)andc)

42.

Theboomerangeffect

A.

thepossibilitythatifthesecretformulaofCoca-Colawereleaked,thatotherfirmswouldcomeupwithsimilarproductsandhurtCoca-Cola'ssales.

B.

thepossibilitythatFDIinanundevelopednationwillleadtoagroupofworkerswhohaveenoughmoneytoaffordthefirm'sproducts,leadingtoanincreaseofsalesandincreaseofworkersandsoon.

C.

thepossibilitythatFDIinanundevelopednationwillleadtoagroupofdomesticworkersnolongerhaveenoughmoneytoaffordthefirm'sproducts,leadingtoandecreaseofsales.

D.

noneoftheabove

43.

Examplesofintangibleassetsinclude

A.

technological,managerial,andmarketingknow-how.

B.

superiorR&Dcapabilities.

C.

brandnames.

D.

alloftheabove

44.

Inthe1960s,Coca-Cola,whichhadbottlingplantsinIndia,facedstrongpressurefromtheIndiangovernmenttorevealtheCokeformulaasaconditionforcontinuedoperationsinIndia.Asaresult,

A.

CokeagreedtorevealtheformulatotheIndiangovernment,whichhasmaintaineditasastatesecrettothisday.

B.

insteadofrevealingtheformula,CokewithdrewfromtheIndianmarket.

C.

Cokewasabletosuccessfullylobbythegovernmenttowithdrawthisdemand.

D.

noneoftheabove

45.

MNCsmayundertakeoverseasinvestmentprojectsinaforeigncountry,despitethefactthatlocalfirmsmayenjoyinherentadvantages.Thisimpliesthat

A.

MNCsaremakingamistakeinthiscaseandwillhavetoeventuallywithdraw.

B.

MNCsshouldhavesignificantadvantagesoverlocalfirmssuchascomparativeadvantagesduetointangibleassets.

C.

thelocalfirmswillnothavetocompeteduetotheirinherentadvantagesovertheforeigners.

D.

noneoftheabove

46.

Intangibleassetsareoftenhardtopackageandselltoforeigners

A.

becausetheyusuallydefaultonthecontractsthattheysign.

B.

asaresult,thereismoreFDIthantheremightotherwisebe.

C.

becausepropertyrightsinintangibleassetsaredifficulttoestablishandprotect,especiallyinforeigncountrieswherelegalrecoursemaynotbereadilyavailable.

D.

bothb)andc)

47.

AccordingtotheinternalizationtheoryofFDI

A.

firmsthathaveintangibleassetswithapublicgoodpropertytendtoinvestdirectlyinforeigncountries.

B.

propertyrightsinintangibleassetsaredifficulttoestablishandprotect,especiallyinforeigncountrieswherelegalrecoursemaynotbereadilyavailable.

C.

bothb)anda)

D.

noneoftheabove

48.

Firmsthathaveintangibleassetswithapublicgoodpropertytendtoinvestdirectlyinforeigncountries.Thisisbecause

A.

inordertousetheseassetsonalargerscale.

B.

toavoidthemisappropriationthatmayoccurwhiletransactinginforeigncountriesthroughthemarketmechanism.

C.

alloftheabove

49.

Whatkindofintegrationisverticalintegration?

A.

Whenthegovernmentoutlawsdiscriminationagainstbothshortandtallpeople.

B.

Whentwofirmsjointogetherinaconglomeratemerger.

C.

Whentwofirmsrelatedintheproductionprocessareownedbythesamefirm,asinaplywoodmanufacturerowningaloggingcompany.

D.

Alloftheabove

50.

Theconflictsbetweentheupstreamanddownstreamfirmscanberesolved,

A.

ifthetwofirmsformahorizontallyintegratedfirm.

B.

ifthetwofirmsformaverticallyintegratedfirm.

C.

ifthetwofirmsformalinearlyintegratedfirm.

D.

noneoftheabove

51.

ManyMNCsinvolvedinextractive/naturalresourcesindustries

A.

tendtodirectlyownoilfields,minedeposits,andforests.

B.

tendtoleasetheiroilfields,minedeposits,andforests.

C.

tendtopartnerwithlocalfirms,leveragingtheirintangibleassets.

D.

noneoftheabove

52.

Also,MNCsoftenfinditprofitabletolocatemanufacturing/processingfacilitiesnear

A.

thehomeofficetoexploittheirassetsinplace.

B.

thenaturalresourcesinordertosavetransportationcosts.

C.

theircompetitor'smanufacturingplanttoevenouttheplayingfieldwithregardtoshippingcosts.

D.

noneoftheabove

53.

FDIverticalintegrationisbackward

A.

whenFDIinvolvesanindustryabroadthatproducesinputsforMNCs.

B.

whenFDIinvolvesanindustryabroadthatsellstheMNC'soutputs.

C.

noneoftheabove

54.

Themajorityofforeignverticalintegrationis

A.

backward.

B.

forward.

C.

sideways.

D.

noneoftheabove

55.

AnexampleofforwardverticalFDI

A.

U.S.carmakersbuilttheirownnetworkofdealershipsinJapantohelpselltheircars.

B.

U.S.carmakersbegantosourcepartsinJapantolowerthecostoftheircars.

C.

U.S.carmakersenteredintojointpartnershipswithcarmakersinJapantohelpselltheircars.

D.

Noneoftheabove

56.

U.S.carmakerswereforcedtobuildtheirownnetworkofdealershipstoentertheJapanesemarket.

A.

Thisisanexampleofbackwardverticalintegration.

B.

Thisisanexampleofforwardverticalintegration.

C.

Thisisanexampleofsidewaysverticalintegration.

D.

Noneoftheabove

57.

Whichofthefollowingstatementsistrueaboutproductlifecycletheory?

A.

Intheearlystagesoftheproductlifecycle,thedemandforthenewproductisrelativelyinsensitivetothepriceandthusapioneeringfirmcanchargearelativelyhighprice.

B.

ItpredictsthatovertimetheU.S.switchesfromanexportingcountryofnewproductstoanimportingcountry.

C.

Ithasan"S"shapedcurvewhenplotting"quantitysold"versus"time".

D.

Alloftheabove

58.

AccordingtoRaymondVernon(1966),

A.

U.S.firmsundertakeFDIataparticularstageinthelifecycleoftheproductsthattheyinitiallyintroduced.

B.

themajorityofnewproducts,suchascomputers,televisions,andmass-producedcars,weredevelopedbyU.S.firmsandfirstmarketedintheUnitedStates.

C.

intheearlystageoftheproductlifecycle,thedemandforthenewproductisrelativelyinsensitivetothepriceandthusthepioneeringfirmcanchargearelativelyhighprice.

D.

alloftheabove

59.

Theproductlife-cycletheorypredictsthat

A.

overtimetheUnitedStatesswitchesfromanexportingcountryofnewproductstoanimportingcountry.

B.

overtimetheUnitedStatesswitchesfromacomparativeadvantageinR&Dtoaserviceeconomy.

C.

overtimetheUnitedStateseducationsystemmaintainsthecountry'sdominantpositionintheworldeconomy.

D.

noneoftheabove

60.

Whichofthefollowingstatementsistrueaboutproductlifecycletheory?

A.

Thetheorywasdevelopedinthe1960swhentheU.S.wastheleaderinR&D.

B.

Theinternationalsystemofproductionisbecomingtoocomplicatedtobeexplainedbyasimpleversionoftheproductlifecycletheory.

C.

ItpredictsthatovertimetheU.S.switchesfromanexportingcountryofnewproductstoanimportingcountry.

D.

Alloftheabove

61.

SinceshareholdersofMNCsmayindirectlybenefitfromcorporateinternationaldiversification,

A.

thereforefirmsaremotivatedtoundertakeFDIforthepurposeofprovidingshareholderswithdiversificationservices.

B.

thereforefirmsaremotivatedtoundertakeFDIforthepurposeofbeingpartoftheglobalminimumvarianceportfolio.

C.

thereforefirmsaremotivatedtoundertakeFDIforthepurposeofstayingontheefficientfrontier.

D.

noneoftheabove

62.

Consideringthefactthatmanybarrierstointernationalportfolioinvestmentshavebeendismantledinrecentyears,

A.

capitalmarketimperfectionsasamotivatingfactorforFDIarelikelytobecomemoreimportantgoingforward.

B.

capitalmarketimperfectionsasamotivatingfactorforFDIarelikelytobecomelessrelevant.

C.

labormarketimperfectionsasamotivatingfactorforFDIarelikelytobecomelessrelevant.

D.

noneoftheabove

63.

Whenafirmholdsassetsinmanycountries,

A.

thefirm'scashflowsareinternationallyhedged.

B.

thus,shareholdersofthefirmcanindirectlybenefitfrominternationaldiversificationeveniftheyarenotdirectlyholdingforeignshares.

C.

thus,shareholdersofthefirmcandirectlybenefitfrominternationaldiversificationeveniftheyarenotdirectlyholdingforeignshares.

D.

noneoftheabove

64.

WhichofthefollowingisthemostdisingenuousargumentinfavorofFDI?

A.

Shareholderdiversification

B.

TheinternalizationtheoryofFDI

C.

Thepromiseofsynergisticgains

D.

Verticalintegration

65.

A"Greenfield"investment

A.

involvessoybeansinthespring,corninthesummer.

B.

aregenerallylesspoliticallysensitivethantheacquisitionofanexistingforeignfirm.

C.

aregenerallymorepoliticallysensitivethantheacquisitionofanexistingforeignfirm.

D.

noneoftheabove

66.

Asamodeofentryintoaforeignmarket,cross-borderacquisition

A.

involvesbuildingnewproductionfacilitiesinaforeigncountry.

B.

offerfasterspeedoverGreenfieldinvestment.

C.

canofferaccesstoproprietaryassets.

D.

bothb)andc)

67.

Cross-borderacquisitioninvolves

A.

buildingnewproductionfacilitiesinaforeigncountry.

B.

buyingexistingforeignbusiness.

C.

botha)andb)

D.

noneoftheabove

68.

Therapidincreaseincross-borderM&Adealscanbeattributedto

A.

theendoftheGreenfieldera—wearerunningoutofland.

B.

thelackofdomesticinvestmentopportunity.

C.

theongoingliberalizationofcapitalmarketsandtheintegrationoftheworldeconomy.

D.

noneoftheabove

69.

AsamodeofFDIentry,cross-borderM&AofferstwokeyadvantagesoverGreenfieldinvestments:

A.

speedandaccesstoproprietaryassets.

B.

firmsbolstertheircompetitivepositionsintheworldmarketbyacquiringspecialassetsfromotherfirmsorusingtheirownassetsonalargerscale.

C.

firmscanbetterleveragetheirintangibleassetsandonalargerscale.

D.

noneoftheabove

70.

Mergersandacquisitionsareapopularmodeofinvestmentforfirmswishingtoprotect,consolidateandadvancetheirglobalcompetitivepositions.Examplesinclude,

A.

sellingoffdivisionsthatfalloutsidethescopeoftheircorecompetence.

B.

acquiringstrategicassetsthatreducetheircompetitiveness.

C.

firmscanbetterleveragetheirintangibleassetsandonalargerscalethroughlicensing.

D.

noneoftheabove

71.

Synergisticgainsrefersto:

A.

gainsfromhedging.

B.

gainsobtainedwhenthevalueoftheacquiringandtargetfirms,combinedtogether,isgreaterthanthestand-alonevaluationsoftheindividualfirms.

C.

gainsarisingifthecombinedcompaniescansaveonthecostsofproduction,marketing,distribution,andR&D.

D.

bothb)andc)

72.

Whetherornotcross-borderacquisitionsproducesynergisticgainsandhowsuchgainsaredividedbetweenacquiringandtargetfirms

A.

areimportantissuesfromtheperspectiveofshareholderwelfare.

B.

areimportantissuesfromtheperspectiveofpublicpolicy.

C.

areimportantissuesfromtheperspectiveofstakeholdersinthetargetfirms.

D.

alloftheabove

73.

Imperfectionsinthemarketforintangibleassetscanalsoplayamajorroleinmotivatingfirmstoundertakecross-borderacquisitions.Accordingtotheinternalizationtheory,

A.

cross-borderacquisitionsmayalsobemotivatedbytheacquirer'sdesiretoacquireandinternalizethetargetfirm'sintangibleassets.

B.

afirmwithintangibleassetsthathaveapublicgoodpropertysuchastechnicalandmanagerialknow-howmayacquireforeignfirmsasaplatformforusingitsspecialassetsonalargerscaleand,atthesametime,avoidthemisappropriationthatmayoccurwhiletransactinginforeignmarketsthroughamarketmechanism.

C.

theinternalizationthusmayproceedforwardtointernalizetheacquirer'sassets,orbackwardtointernalizethetarget'sassets.

D.

alloftheabove

74.

InastudyoftheeffectofinternationalacquisitionsonthestockpricesofU.S.firms.U.S.acquiringfirmswithinformation-basedintangibleassetsexperienceasignificantlypositivestockpricereactionuponforeignacquisition.

A.

Thisisconsistentwiththefindingthatthemarketvalueofthefirmispositivelyrelatedtoitsmultinationalitybecauseofthefirm'sintangibleassets,suchasR&Dcapabilities,withpublicgoodnature.

B.

Itisnotthemultinationalitypersethatcontributestothefirm'svalue.

C.

Theirempiricalfindingssupportthe(forward-)internalizationtheoryofFDI.

D.

Alloftheabove

75.

Synergisticgains

A.

areobtainedwhentheacquiringfirmisgreaterinvaluethanthestand-alonevaluationsofthetargetfirm(s).

B.

canonlybeobtainedbyincreasesinmarketpower.

C.

areobtainedwhenthevalueofthecombinedfirmisgreaterthanthestand-alonevaluationsoftheindividual(acquiringandtarget)firms.

D.

noneoftheabove

76.

Ifcross-borderacquisitionsgeneratesynergisticgains,

A.

thenboththeacquiringandtargetshareholdersgainwealthatthesametime.

B.

thenonecanarguethatcross-borderacquisitionsaremutuallybeneficialandthusshouldnotbethwartedbothfromanationalandglobalperspective.

C.

thenthevalueofthecombinedfirmisgreaterthanthestand-alonevaluationsoftheindividual(acquiringandtarget)firms.

D.

alloftheabove.

77.

OPICisthe

A.

OverseasPirateInvestmentCorporation.

B.

OverseasPrivateInvestmentCorporation.

C.

OrganizationPetroleumImportingCountries.

D.

Noneoftheabove

78.

Cross-borderacquisitionsofbusinessesareapoliticallysensitiveissue,

A.

asmostcountriesprefertoretainforeigncontrolofdomesticfirms.

B.

asmostcountriesprefertoretainlocalcontrolofdomesticfirms.

C.

asmostcountriesprefertoretainlocalcontrolofforeignfirms.

D.

noneoftheabove

79.

Politicalriskrefersto:

A.

thepotentiallossestotheparentfirmofanMNCresultingfromadversepoliticaldevelopmentsinthehostcountry.

B.

macroeconomicrisks.

C.

microeconomicrisks.

D.

bankruptcyorhighinflationrates.

80.

Transferriskreferstotheriskwhicharisesfromtheuncertaintyabout

A.

thehostcountry'spoliciesaffectingthelocaloperationsofanMNC.

B.

thehostcountry'spolicyregardingownershipandcontroloflocaloperations.

C.

cross-borderflowsofcapital,payment,know-how,andthelike.

D.

noneoftheabove

81.

Operationalriskreferstotheriskwhicharisesfromtheuncertaintyabout

A.

thehostcountry'spoliciesaffectingthelocaloperationsofanMNC.

B.

thehostcountry'spolicyregardingownershipandcontroloflocaloperations.

C.

cross-borderflowsofcapital,payment,know-how,andthelike.

D.

noneoftheabove

82.

CountriesmaywelcomeGreenfieldinvestments,

A.

astheyareviewedasrepresentingnewinvestmentandemploymentopportunities.

B.

astheyareviewedassubstitutesforforeignfirms'bidstoacquiredomesticfirms.

C.

buttheyarealsooftenresistedandsometimesevenresentedbythelocalfirms.

D.

noneoftheabove

83.

Countryriskrefersto

A.

politicalrisk.

B.

creditrisk,andothereconomicperformances.

C.

everyriskexceptpoliticalrisk.

D.

botha)andb)

84.

MorethanfiftypercentofFDIindollarterms

A.

takestheformofcross-bordermergersandacquisitions.

B.

takestheformofGreenfieldinvestment.

C.

isinitiatedbygovernments.

D.

noneoftheabove

85.

Anincreaseinpoliticalriskcanbemanagedby

A.

adjustingaforeigninvestmentproject'sNPVbyeitherreducingitsexpectedcashflows,orbyincreasingthecostofcapital.

B.

formingjointventurewithalocalcompany.

C.

purchaseinsuranceagainstthehazardofpoliticalrisk.

D.

alloftheabove

86.

SomeoftherisksthataU.S.basedMNCcanencounterinitsforeigninvestmentsare:

(i)-anincreaseinthecostofborrowingduetoariseininterestrates

(ii)-increaseininflationrates

(iii)-dumping

(iv)-unfaircompetitionbylocalcompanies

(v)-inconvertibilityofforeigncurrencies

(vi)-expropriation

(vii)-destructionofpropertiesdu