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Exam 21: International Financial Management

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Question 61

Multiple Choice

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If the Brazilian real is equal to $0.46,a Canadian dollar is equal to how many Brazilian reals?

A) 1.36
B) 1.96
C) 2.17
D) 0.38

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Question 62

Multiple Choice

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In a licensing agreement,the multinational corporation will very likely:

A) be able to compete with the local domestic manufacturers.
B) experience import restrictions imposed by the foreign government.
C) allow a foreign firm to use its technology in exchange for a fee or a royalty.
D) charge a fee for each item sold.

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Question 63

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In international finance,the term "Balance of Payments" refers to the balance owing from one government to another.

For a Canadian company,foreign business operations are more complex because the:

In a free market,the exchange rate between two currencies is determined by the supply of and demand for those currencies with the influence of the central bank.

A joint venture with a private entrepreneur in a host country exposes the multinational corporation to the least amount of political risk.

Expected future value of a currency is reflected in its spot rate.

Which of the following is a reason for Canadian firms to operate in foreign markets?

The following are the prices in the foreign exchange market between the Canadian dollar and United States dollar (USD) . $\begin{array} { l l } \text { Spot } & \$ 0.02465 / \mathrm { LC } \\3 \text {-month forward } & \$ 0.02473 / \mathrm { LC } \\\text { 6-month forward } & \$ 0.02474 / \mathrm { LC }\end{array}$ What was the discount or premium on 3-month forward and 6 month for United States dollars?

The Export Development Corporation (EDC) :

A particular country's pattern of importing more than is being exported is likely to:

Canada is the world's major importer and exporter,and has by far the greatest investment in foreign countries.

The interplay between interest rate differentials and exchange rates such that each adjusts until the foreign exchange market and the money market reach equilibrium is called the:

Translation exposure occurs because of changes in foreign exchange rates.

Which of the following factors will not increase the value of a currency in foreign markets?

Foreign capital investments are undertaken for reasons that include all of the following except?

The current spot exchange rate between the Japanese yen and the Canadian dollar is ×75.00/$.The yen is expected to appreciate by 6% against the dollar over the next six months.What do you expect the spot exchange rate between the yen and the dollar to be six months from now?

A foreign exchange rate is the rate at which a foreign currency changes relative to the dollar.

The Daily Planet has a wholly owned foreign subsidiary in Malaysia.The subsidiary earns 25 million ringgits per year before taxes in Malaysia.The foreign income tax rate is 30%.The subsidiary repatriates the entire aftertax profits in the form of dividends to the Daily Planet.The Canadian corporate tax rate is 40% of foreign earnings before taxes. A)Compute aftertax cash flow to the Daily Planet from this investment (in ringgits). $\begin{array}{llcc} \text {Before tax earnings (in ringgits) } &\underline{\quad\quad\quad} \\ \text { Foreign income tax at 30 \% } &\underline{\quad\quad\quad} \\ \text { Earnings after foreign income taxes } &\underline{\quad\quad\quad} \\ \text { Dividends repatriated} &\underline{\quad\quad\quad}\\ \text {Gross Canadian taxes at \(40 \%\) of foreign } &\\ \text { earnings before taxes } &\underline{\quad\quad\quad}\\ \text { Foreign tax credit } &\underline{\quad\quad\quad}\\ \text {Net Canadian taxes payable } &\underline{\quad\quad\quad}\\ \text {Aftertax cash flow } &\underline{\quad\quad\quad}\end{array}$ B)If the exchange rate is .40 ($/ringgits),what is the after tax cash flow in dollars? C)CCA related cash flow is 3 million ringgits per year for five years for another Daily Planet investment in Malaysia.The cash flow will earn 10% per year.After five years,it will then be translated back to dollars at an exchange rate of .47 ($/ringgit).The Daily Planet applies a 15% discount rate to foreign cash flows.What is the present value (in dollars)of the CCA related cash flow?

Which of the following statements about the International Finance Corporation is not true?