Chapter 8 Quiz With Asnwers

Japanese manufacturers were not allowed to increase their automobile exports to the US market by the 1981 Voluntary Restraint Agreement When they undertake foreign direct investments, firms become Multinational, MNCS OR Multinationals Market imperfections are key motivating factors driving. FDI Labor services in a Country can be severely underpriced because. barriers prohibit workers from freely moving across national boundaries to seek higher wages. Immigration Trade barriers led Japanese auto manufacturers in the 1980s to engage in FDI by Building new plants in the US. What does FDI involve? Both the establishment of new production facilities in foreign countries and acquisitions of existing foreign businesses. What are examples of market imperfections that would lead a invest overseas? company to Trade Barriers, Shareholder Diversification, Intangible Asset Contracting When firms engage in FDI by buying. in integration. a supplier or customer, they are engaged. Vertical When a firm does not want to pay an import tariff on its exports to a particular market and that market is part of a free trade area, where might the MNC wish to produce? Anywhere in the Free Trade Area According to the theory, when firms first introduce new products, they Choose to produce at home, close to their customers, and only later do they set up production facilities in low-cost foreign countries. Product Life Cycle Firms may choose to locate in countries. relative to its where the price of labor is underpriced which is defined as output per hour. Productivity When an MNC's intangible assets are licensed to a local firm and that knowledge is then used to compete against the MNC, it's an example of the effect. Boomerang A motivation for cross-border acquisition is _ internalized as the "internalization when the assets Backward, Target's Forward, Acquirer's When they undertake foreign direct investments, firms become Multinationals. The outright expropriation of foreign assets and unexpected changes in the tax laws that hurt the profitability of foreign projects are both examples of risks. Political •Vertical FDI is when it involves an industry abroad that the MNC. Backward; Produces the Outputs for Forward, Sells the outputs of What is the ranking of the countries, from least to most corrupt, according to the 20108 Corruption Perception Index? Least Denmark New Zealand Japan Taiwan Israel Most China The U.S. Government organization that offers insurance against political risk is known by the acronym OPIC If after the acquisition the value of the combined firm is greater than the stand- alone valuations of the acquiring and target firms, then there are said to be gains. Synergistic A widely used measure of perceived corruption in the public sector, based on surveys and assessments from institutions, that's compiled by Transparency International is the CPI U.S. companies are legally prohibited from bribing foreign officials by the FCPA Firms can explicitly incorporate political risk into the capital budgeting process and adjust project NPV accordingly using which techniques? Reducing expected cash flows and increasing the cost of capital. Match the type of political risk with the manner firms are affected. Transfer Risk Operational Risk Unexpected Imposition of Capital Controls. - Unexpected Changes in Labor Laws. Control Risk - Nationalization of MNC Assets. What are methods MNCS can use to reduce political risk? Form a consortium of international companies to undertake the foreign project Use local debt to finance the foreign project.. Form a joint venture with a local company.