Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 12.3, Problem 12.5RQ
Briefly explain how the following items affect the capital budgeting decisions of multinational companies: (a) exchange rate risk; (b) political risk; (c) tax law differences; (d) transfer pricing; and (e) a strategic, rather than a strictly financial, viewpoint.
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Chapter 12 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 12.1 - Are most mutually exclusive capital budgeting...Ch. 12.2 - Prob. 12.2RQCh. 12.2 - Describe how each of the following behavioral...Ch. 12.3 - Briefly explain how the following items affect the...Ch. 12.4 - Describe the basic procedures involved in using...Ch. 12.4 - Explain why a firm whose stock is actively traded...Ch. 12.4 - Prob. 12.8RQCh. 12.5 - Explain why a mere comparison of the NPVs of...Ch. 12.5 - What are real options? What are some major types...Ch. 12.5 - What is the difference between the strategic NPV...
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- Which of the following is NOT a proactive financial strategy related to the OLI paradigm in explaining FDI? strategies to gain lower global cost of capital strategies to reduce global taxation O strategies to reduce operating and transaction exposure All of the above are proactive strategies.arrow_forwardHow may the domestic cost of capital for a foreign venture be adjusted to account for currency rate risk, political risk, and nation risk?arrow_forwardExplain the following statement: The optimal financial policy depends in an important way on the nature of the firm's assets?arrow_forward
- What is the impact of capital controls that restrict mobility of capital across nationalborders on domestic financial systems and the performance of the economy?arrow_forwardDiscuss the factors that affect the WACC. Also discuss how these factors may differ somewhat from country to country. For example, if a company has a stronger balance sheet than other companies in its industry, investors will likely be willing to accept a lower interest rates on its bonds and this will lower the company’s overall cost of capital.arrow_forwardList some key differences in capital budgeting as applied to foreign versus domesticoperations.arrow_forward
- Are there international differences in firms’ financial leverage?Explain.arrow_forwardWhich of the following factors is not expected to generally have a favorable impact on the firm's cost of capital? Group of answer choices easy access to international capital markets. high degree of international diversification. high exposure to exchange rate fluctuations. all of thesearrow_forwardExplain the differences of two: Domestic Capital Budgeting and Multinational Capital Budgetingarrow_forward
- A key issue facing financial executives of multinational firms is exposure to exchange rate changes.a. Define exposure, differentiating between accounting and economic exposure. What role does inflation play?b. Describe at least three circumstances under which economic exposure is likely to exist? c. Of what relevance are the international Fisher effect and purchasing power parity to your answers to parts a and b? d. What is exchange risk, as distinct from exposurearrow_forwardQ) Which of the following issues is least relevant to treasury management? A What form of borrowing is appropriate? B. How much should the firm borrow? C. What is the cost of our products?arrow_forwardDiscuss the different positive and negative impacts of financial conglomerate on international cash flows.arrow_forward
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Foreign Exchange Risks; Author: Kaplan UK;https://www.youtube.com/watch?v=ne1dYl3WifM;License: Standard Youtube License