国际财务管理期末考A卷参考答案.pdfVIP

国际财务管理期末考A 卷参考答案  1. Financing Decision. Veer Co. is a U.S. based MNC that has most of its operations in Japan. Since the Japanese companies with which it competes use more financial leverage, it has decided to adjust its financial leverage to be in line with theirs. With this heavy emphasis on debt, Veer should reap more tax advantages. It believes that the market’s perception of its risk will remain unchanged, since its financial leverage will still be no higher than that of its Japanese competitors. Comment on this strategy. ANSWER: Japanese corporations can use a higher degree of financial leverage because of their relationships with creditors and the government. The Japanese government may be willing to bail out a Japanese company whose shares are held by Japanese investors and institutions. Yet, it is less likely to bail out a subsidiary of a U.S. corporation. The Japanese subsidiary does not receive the same protection that other Japanese firms receive. Therefore, if this subsidiary attempts to use as much financial leverage, its risk will be higher than that of the Japanese competitors.   2. Diversifying Away Country Risk. Why do you think that an MNC’s strategy of diversifying projects internationally could achieve low exposure to country risk? ANSWER online: If the MNC can set up foreign projects in countries whose country risk levels are not highly correlated over time, then it reduces the exposure to the possibility of high country risk in all of these areas simultaneously. Answer by students: The country specific risks vary among different countries, which suggests that MNCs may be able o reduce their exposure to country risk by spreading their business among various economies.   3. Alternatives to I