Test bank International Finance MCQ (word)Chap 19.doc

Fundamentals of Multinational Finance, 3e (Moffett) Chapter 19 Multinational Capital Budgeting 19.1 Multiple Choice and True/False Questions 1) The traditional financial analysis applied to foreign or domestic projects, to determine the projects value to the firm is called ________. A) cost of capital analysis B) capital budgeting C) capital structure analysis D) agency theory Answer: B Topic: Capital Budgeting Skill: Recognition 2) Which of the following is NOT a basic step in the capital budgeting process? A) Identify the initial capital invested. B) Estimate the cash flows to be derived from the project over time. C) Identify the appropriate interest rate at which to discount future cash flows. D) All of the above are steps in the capital budgeting process. Answer: D Topic: Capital Budgeting Skill: Recognition 3) Of the following capital budgeting decision criteria, which does NOT use discounted cash flows? A) net present value B) internal rate of return C) accounting rate of return D) All of these techniques typically use discounted cash flows. Answer: C Topic: Accounting Rate of Return Skill: Recognition 4) There are no important differences between domestic and international capital budgeting methods. Answer: FALSE Topic: Capital Budgeting Skill: Recognition 5) Which of the following is NOT a reason why capital budgeting for a foreign project is more complex than for a domestic project? A) Parent cash flows must be distinguished from project cash flows. B) Parent firms must specifically recognize remittance of funds due to differing rules and regulations concerning remittance of cash flows, taxes, and local norms. C) Differing rates of inflation between the foreign and domestic economies. D) All of the above add complexity to the international capital budgeting process. Answer: D Topic: Capital Budgeting for Foreign Projects Skill: