1 With regard to corporate goals an MNC is mostly concermed

1. With regard to corporate goals, an MNC is mostly concermed with maximizingand a purely domestic firm is mostly concerned with maximizing shareholder wealth; short-term earnings shareholder wealth; shareholder wealth C) short-term earnings; sales volume D) short-term earnings; shareholder wealth The valuation of an MNC should rise when an event causes the expected cash flows from foreign division to expected to A) decrease; appreciate B) increase; appreciate 2· and when foreign currencies denominating these cash flows are decrease; depreciate increase; depreciate 3. The agency costs of an MNC are likely to be lower if it A) scatters its subsidiaries across many foreign countries B) increases its volume of international business. . C) uses a centralized management style. D) scatters its subsidiaries across many foreign countries AND increases its volume of international business. The Sarbanes-Oxley Act improves corporate governance of MNCs because it . A) makes executives more accountable for verifying financial statements B) eliminates stock options as a form of compensation. C) ties executive compensation to firm performance D) places a limit on the amount of funds that managers can spend. 4. Which of the following is an example of direct foreign investment? A) exporting to a country. B) establishing licensing arrangements in a country C) purchasing existing companies in a country D) investing directly (without brokers) in foreign stocks 5. the home countrys current account balance, other things equal. A high growth in the home income level relative to other countries would equal 6. A high home inflation rate relative to other countries would the home country\'s current account balance, other things A) increase; increase B) increase; decrease C) decrease; decrease D) decrease: increase

Solution

1. the goal of any company irrespective of MNC or a corporate firm is maximizing the shareholder wealth.

therefore,

the correct option is B.

2. the correct option is B.

The MNC, which will receive cash flows from its foreign division benefits from strengthening of the foreign currency .when converting the foreign currency in the domestic currency the domestic currency benefits from a strenghtening of the foreign currency as more of the domestic currency units will be generated upon the conversion and increase in the cash flows of the foreign company means higher cash flows plus appreciating currency will result in more units of domestic currency upon conversion from the foreign currency.

3. The agency costs of MNC\'s can be reduced by adopting a centralized management style. a centralized management system ensures control over all the subsidaries through a single management, by using electronic networks which will monitor the actions and controls the different subsidaries.

4. the correct option is option a.

the Sarbanes oxley act made disclosures mandatory such that the investors receive the true and correct information. it improved disclosures and accountability .

5. purchasing equities in a foreign country is not FDI that is portfolio investments.

purchasing companies in a foreign country is called FDI.

the correct option is option c.

6. a high inflation will defenitely reduce a home country\'s current account balance because inflation erodes into a contry\'s earnings. A high growth will result in an increase in the home country\'s balance.

the correct option is option D.