TB Chapter 13

 

254

 International Financial Management 

Chapter 13 Direct Foreign Investment

1. Based Based on the text, it should should be obviou obviouss that markets markets are_______ are__________ ___ in real reality ity,, and consequ consequent ently ly,, monopolistic advantages _________ be exploited. ! per per"e "ect# ct# m may ay pos possib sibly ly B! pe per" r"ec ect# t# can canno nott $! imper"e imper"ect# ct# may possibl possibly y %! impe imper" r"ect ect## cann cannot ot &'()*+ $ 2. (hen a "irm analyes analyes the "easibility "easibility o" o" a pro-ect, it should should con consider sider the+ ! variability o" the pro-ects pro-ects cash "lo/ "lo/.. B! correlation correlation o" the pro-ect pro-ectss cash "lo/ relative relative to the the prevailing prevailing cash "lo/s "lo/s o" the 0&$. $!  and B %! no none ne o" the the above above &'()*+ $ . he __________ __________ a pro-ects pro-ects variability variability in cash "lo/s, "lo/s, and the the __________ __________ the po positiv sitivee correlation correlation  bet/een  bet/e en the the pro-ect pro-ectss cash "lo/ and 0&$s 0&$s cash "lo/, "lo/, the lo/er lo/er the risk risk o" the pro-ect. pro-ect. ! hi high gher er## hi high gher  er  B! hi high gher er## llo/ o/er  er  $! lo lo/e /er# r# lo lo/ /er  %! lo lo/e /er# r# hi high gher  er  &'()*+ $ 4. 0ost 0ost o" the the %3 by by .'. .'. "irms "irms is is 0exi 0exico co.. ! true. B! "alse. &'()*+ B

 

255

 International Financial Management 

5. $onsider $onsider 3irm 67 67 and 3irm 6B7 that that both produce the same product. product. 3irm 67 /ould more likely likely have more stable cash "lo/s i" its percentage o" "oreign sales /ere __________ and the number o"  "oreign countries it sold products to /as __________. ! hi high gher er## large large B! hi high gher er## sma small ll $! lo lo/e /er# r# smal smalll %! hi high gher er## large large &'()*+  8. ccording ccording to the tex text, t, a "irm may be able to to achiev achievee a 6more e""ici e""icient7 ent7 pro-ect pro-ect port port"olio "olio i" it+ ! "ocuses "ocuses so solel lely y on o one ne produ product. ct. B! "ocuses solely solely on one one location location to market /hat /hat it produces. produces. $!  and B %! no none ne o" the the above above &'()*+ % 9. ccording ccording to in"ormatio in"ormation n in the text, a host government government /ould /ould be least least likel likely y to provide provide incen incentives tives "or direct "oreign investment :%3! into its country i" the "irm planning %3+ ! /ould compete compete /ith /ith local "irms "irms o" the host host country. country. B! /ould produce a good good not currently currently available available in the host host country. country. $! /ould produce a good and export export it to other other countries. countries. %! B and $ &'()*+  ;. " countries countries are highly in"luential in"luential upon upon each other other,, the correlations correlations o" their their economic economic gro/th gro/th le levels vels /ould likely be __________. __________ .  "irm /ould bene"it __________ by diversi"ying sales among these countries relative to another set o" countries that /ere not in"luential upon each other. ! high high and and posit positiv ive# e# more more B! clo close se to ero# ero# more more $! high high and positi positive# ve# less less %! clo close se to ero ero## less less &'()*+ $ related motive "or direct "oreign investment. ! ttractin ttracting g ne/ sour sources ces o" dema demand nd B! 3ully bene"i bene"iting ting "rom econo economies mies o" scale $! )xploiting )xploiting mono monopoli polistic stic advantag advantages es %! )nterin )ntering g pro"it pro"itable able mark markets ets &'( & '()* )*++ B 2;. ____________ is notpolistic a cost>relate cost>related d motive motiv investment. ment. ! )xploiting )xploiting mono monopoli stic advantag advantages es e "or direct "oreign invest B! 3ully bene"i bene"iting ting "rom econo economies mies o" scale $! ses ses "oreig "oreign n "ac "actors tors o" producti production on %! sing sing "ore "oreign ign ra/ mat materia erials ls &'( & '()* )*++ 

 

Chapter 13: Direct Foreign Investment  Investme nt 

28=

2