Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 21, Problem 16DQ
Summary Introduction
To explain:Â Any dilemmas that MNCs may face regarding debt ratio limits and dividend pay-outs.
Introduction:
Multinational firm:
It is a business organization that operates and produces in at least one more country other than the country in which it has been incorporated.
Dividend pay-out ratio:
It is the ratio of total dividends paid to the shareholders of a company to the total earnings of the company.
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Discuss concisely some dilemmas that multinational firms and their foreign affiliates may face regarding debt ratio limits and dividend payouts?
Question 1
(ILOs: A1, A2, B1, C1, C2, D1, D4)
a. Some countries do not have well-established market for
debt securities or equity securities. Why do you think this
can limit the development of the country, business
expansion, and growth in national income in these
countries?
b. When economic crises in countries are due to a weak
economy, local interest rates tend to be very low. However,
if the crisis is caused by an unusually high rate of inflation,
the interest rate tends to be very high. Explain why?
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 exposure
Chapter 21 Solutions
Foundations of Financial Management
Ch. 21 - Prob. 1DQCh. 21 - Prob. 2DQCh. 21 - List the factors that affect the value of a...Ch. 21 - Prob. 4DQCh. 21 - Differentiate between the spot exchange rate and...Ch. 21 - What is meant by translation exposure in terms of...Ch. 21 - Prob. 7DQCh. 21 - Prob. 8DQCh. 21 - Prob. 9DQCh. 21 - Prob. 10DQ
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