FIN4604 Exam 1 Practice Prof. Kelsey SyvrudSpring 2014*Disclaimer: I have not taken this class or this professor before. I do not know what to expect on the test. I have shifted her Power - Points into an Exam format. I did take her Office mate’s course over the summer (Karen Sherrill for FIN3244) and her tests were based on the majority of the information from the slides, I made a practice exam for her final and did very well on it compared to her other tests. Finally, I created some of this practice exam without attending her exam review so it is not slimmed down according to her review – on the entirety of the slides. I know studying is much easier for me if I actually have to put my brain to work rather than regurgitate information. Hopefully this helps you out!PRACTICE EXAM ON TOP / ANSWER KEY ON SECOND HALFChapter 1 (8 questions)1. Which business discipline functions does not influence finance decisions as discussed in class?a. Marketingb. Managementc. Government Policies and Procedures of foreign marketsd. Accounting and Information Systems2. Costs are normally lower for Multi National Corporations than for purely domestic firms.a. Trueb. False3. Which of the following is not how firms engage in international business as discussed in class?a. Licensing and Franchisingb. Joint Venturesc. Domestic Traded. Acquisitions and Mergers of existing operationse. Establishing new foreign subsidiaries.4. Which of the following is a Major Disadvantage in regards to licensing?a. Obligates a firm to provide its technology, copyrights, patents, trademarks, etc. in exchange for fees and/or benefitsb. Allows firms to use their technology in foreign markets without major investment or transportation costs from exportsc. Ensuring quality control in foreign production process is difficultd. All of the above5. Which of the following is false?a. Franchising obligates firms to provide a specialized sales or service strategy support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.b. Franchising allows penetration into foreign markets without a major investment in foreign countries.c. Joint Ventures are jointly operated and owned by two or more marketsd. Firms may enter foreign markets by engaging in joint ventures with firms that reside in those markets in order to apply respective cooperative advantages.e. None of the Above6. In regards to acquisitions of existing operations, which of the following is false?a. Acquisitions of firms in foreign countries is relatively easy due to government policies and procedure in place that follow a strict, methodical, and straightforwardregimen.b. Acquisitions of firms in foreign countries allows firms to have full control over their foreign businesses and quickly obtain a large portion of foreign market sharec. Acquisition is subject to the risk of large losses because of larger investmentd. Liquidation may be difficult if the foreign subsidiary performs poorly.7. Which of the following is true of establishing new foreign subsidiaries?a. Firms can penetrate markets by establishing new operations in foreign countriesb. Requires a large investmentc. New foreign subsidiaries allows operational tailoring exactly to the firms needsd. May require a small investment than buying an existing firme. All of the above8. Which of the following is not true as discussed in class?a. Exposure to international economic conditions: If economic conditions in a foreigncountry weaken, purchase of products decline and MNC sales in that country may be lower than expected.b. Exposure to liquidity risk: The corporation will not attain adequate foreign investment and will not be appealing to larger Multi National Corporations for Joint Venture or Merging opportunities.c. Exposure to international political risk: A foreign government may increase taxes or impose barriers on the MNC’s subsidiary.d. Exposure to exchange rate risk: If foreign currencies related to the MNC subsidiaryweaken against the U.S. dollar, the MNC will receive a lower amount of dollar cash flows than was expected.*Note the Domestic and Foreign Valuation Models   ntttkCFEV1$,1 Where V represents prevent value of expected cash flow E(CF) represents expected cash flows to be received at the end of period t N represents the number of periods into the future in which cash flows are received K represents the required rate of return by investors      mjtjtjtSECFECFE1,,$, Where CF represents the amount of cash flow dominated in a particular foreign currency, j, at the end of period t. S represents the exchange rate at which the foreign currency (measured in dollars per unit of the foreign currency) can be converted to dollars at the end of period “t”Chapter 2 (10 questions)1. Which are the appropriate functions of the Capital and Current Account in regards to the Balance of Payments?a. Current Account: summary of flow of funds resulting from the sale of assets between one specified country and all other countries over a specified period of time.b. Capital Account: summary of flow of funds due to purchases of goods or services or the provision of income on financial assets.c. Current Account: summary of flow of funds due to purchases of goods or services or the provision of income on financial assets.d. Capital Account: summary of flow of funds resulting from the sale of assets between one specified country and all other countries over a specified period of time.e. A and Bf. C and D2. Which of the following are associated with the financial account?a. Direct Foreign Investmentb. Portfolio Investmentc. Other Capital Investmentd. Errors and Omissionse. All of the Above3. Which of the following is not true?a. A portfolio Investment features transactions involving long-term financial assets between countries that do not affect transfer of control.b. An example of portfolio investment is a private investor investing in a Multinational Corporationc. A Direct Foreign Investment is a transaction involving long term financial assets between countries that do no affect the transfer of control.d. An example of a Direct Foreign Investment is a private investor investing in a multinational corporatione. A and Bf. C and D4. Which of the following is false?a. Other Capital Investments represent transactions involving short-term financial assets between countries.b. Errors and