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International Finance Problems - When a firm analyzes the feasibility of a project, it should consider what?

When a firm analyzes the feasibility of a project, it should consider the:
A)variability of the project's cash flow.
B)correlation of the project's cash flow relative to the prevailing cash flows of the MNC.
C)A and B
D)none of the above

The __________ a project's variability in cash flows, and the __________ the positive correlation between the project's cash flow and MNC's cash flow, the lower the risk of the project.
A)higher; higher
B)higher; lower
C)lower; lower
D)lower; higher

____________ is not a disadvantage of direct foreign investment.
A)The expense of establishing a foreign subsidiary
B)The uncertainty of inflation and exchange rate movements
C)Political risk
D)All of the above are disadvantages of direct foreign investment

During periods of exchange rate volatility, firms dealing in _______ products face more exchange rate risk than the firms selling _________ products.
A) low demand, high demand
B) low supply, high supply
C) undifferentiated, differentiated
D) differentiated, undifferentiated

Suppose that the current 90?day London interbank offer rate is 11% (all rates are stated on an annualized basis. If next period's LIBOR is 10.5%, then a Eurodollar rate priced at LIBOR plus 1% will cost
A) 12% this period and 11.5% next period
B) 11% this period and 10.5% next period
C) 12% this period and 12% next period
D.) 11% this period and 11% next period

Solution Preview

When a firm analyzes the feasibility of a project, it should consider the:

C)A and B

The __________ a project's variability in cash flows, and the __________ the positive correlation between the project's cash flow and MNC's cash flow, the lower the risk of the project.

D)lower; higher

____________ is not a ...

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