The Sarbanes-Oxley Act caused corporate governance of MNCs to _________; it makes executives ____ accountable for verifying financial statements.
a. improve; more
b. deteriorate; less
c. improve; less
d. deteriorate; more
The valuation of an MNC should decline when an event causes the expected cash flows from foreign subsidiaries to ____ and when the foreign currencies denominating these cash flows are expected to ____.
a. decrease; appreciate
b. increase; depreciate
c. decrease; depreciate
d. increase; appreciate
The agency costs of an MNC are likely to be higher if it
a. scatters its subsidiaries across many foreign countries.
b. decreases its volume of international business.
c. uses a centralized management style.
d. B and C.
According to the text, the valuation of an MNC with foreign subsidiaries is directly affected by all of the following except_______________.
a. exchange rate fluctuations
b. foreign political conditions
c. foreign economic conditions
d. It is affected by all of the above.
Assume that an American firm wants to engage in international business in which it establishes a large subsidiary in the foreign country. This strategy definitely represents ______________.
a. licensing
b. franchising
c. direct foreign investment
d. a joint venture
Which of the following is the most direct example of political risk in Spain for a U.S.-based MNC with a subsidiary in Spain?
a. Spain's government may impose special taxes on the subsidiary.
b. Consumers in the U.S. may purchase products from companies in Spain.
c. Spain's economy may decrease.
d. Spain's government may change tax rates on income earned by local citizens.
Compared to international trade, direct foreign investment generally results in ____ exposure to international political risk and ____ exposure to international economic conditions.
a. higher; lower
b. lower; higher
c. lower; lower
d. higher; higher