QUESTION 29 The DoDo Bird Co., a U.S.-based MNC has applied the following regression model to estimate the sensitivity of its cash flows to exchange rate movements PCF; = a0 + bęet + Ut Where the term on the left hand-side is the percentage change in the inflation adjusted cash flows measured in U.S. dollars over period t and eț is the percentage change in the exchange rate of the euro (versus the dollar; number of dollars required to buy one euro) over period t. The regression model estimates a coefficient of bị equal to 0.5. This indicates that: O a. If the euro appreciates by 1%, DoDo Bird's dollar cash flows will decline by .5%. O b.If the euro depreciates by 1%, DoDo Bird's dollar cash flows will increase by 2%. O .If the euro depreciates by 1%, DoDo Bird's dollar cash flows will decrease by 2%. O d. If the euro depreciates by 1%, DoDo Bird's dollar cash flows will decline by .5%. O e. None of the above QUESTION 30 The 2017 Tax Cuts and Jobs Act: O a. Lowered corporate tax rate to 41% O b. Imposed a Sales Tax for US-based MNCS O c. Introduced a Value-Added Tax in the US O d. Lowered corporate tax rate to 21% O e. Replaced the Internal Revenue Service by the External Revenue Service

QUESTION 29 The DoDo Bird Co., a U.S.-based MNC has applied the following regression model to estimate the sensitivity of its cash flows to exchange rate movements PCF; = a0 + bęet + Ut Where the term on the left hand-side is the percentage change in the inflation adjusted cash flows measured in U.S. dollars over period t and eț is the percentage change in the exchange rate of the euro (versus the dollar; number of dollars required to buy one euro) over period t. The regression model estimates a coefficient of bị equal to 0.5. This indicates that: O a. If the euro appreciates by 1%, DoDo Bird's dollar cash flows will decline by .5%. O b.If the euro depreciates by 1%, DoDo Bird's dollar cash flows will increase by 2%. O .If the euro depreciates by 1%, DoDo Bird's dollar cash flows will decrease by 2%. O d. If the euro depreciates by 1%, DoDo Bird's dollar cash flows will decline by .5%. O e. None of the above QUESTION 30 The 2017 Tax Cuts and Jobs Act: O a. Lowered corporate tax rate to 41% O b. Imposed a Sales Tax for US-based MNCS O c. Introduced a Value-Added Tax in the US O d. Lowered corporate tax rate to 21% O e. Replaced the Internal Revenue Service by the External Revenue Service

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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