FIN4604 Exam 1 Practice Prof Kelsey Syvrud Spring 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 HALF 1 Which business discipline functions does not influence finance decisions as discussed in Chapter 1 8 questions class a Marketing b Management a True b False class c Government Policies and Procedures of foreign markets d Accounting and Information Systems 2 Costs are normally lower for Multi National Corporations than for purely domestic firms 3 Which of the following is not how firms engage in international business as discussed in a Licensing and Franchising b Joint Ventures c Domestic Trade d Acquisitions and Mergers of existing operations e 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 benefits b Allows firms to use their technology in foreign markets without major investment or transportation costs from exports c Ensuring quality control in foreign production process is difficult d All of the above 5 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 b Franchising allows penetration into foreign markets without a major investment in for periodic fees foreign countries c Joint Ventures are jointly operated and owned by two or more markets d 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 Above 6 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 straightforward regimen 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 share c Acquisition is subject to the risk of large losses because of larger investment d 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 countries b Requires a large investment c New foreign subsidiaries allows operational tailoring exactly to the firms needs d May require a small investment than buying an existing firm e All of the above 8 Which of the following is not true as discussed in class a Exposure to international economic conditions If economic conditions in a foreign country 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 subsidiary weaken 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 V n t 1 CFE t t 1 k 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 K represents the required rate of return by investors CFE t CFE tj SE tj received m j 1 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 Balance of Payments 1 Which are the appropriate functions of the Capital and Current Account in regards to the 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 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 time e A and B f C and D 2 Which of the following are associated with the financial account a Direct Foreign Investment b Portfolio Investment c Other Capital Investment d Errors and Omissions e All of the Above 3 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 Corporation c 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 corporation e A and B f C and D 4 Which of the following is false assets between countries a Other Capital Investments represent transactions involving short term financial b Errors and Omissions represent the balancing between the current account and the financial account that is not always perfect c Portfolio Investment measures the expansion of a firms foreign operation