quiz

Topics: Net present value, Investment, Discounted cash flow Pages: 8 (755 words) Published: July 6, 2014
Question 1
2 / 2 pts
What is a capital investment? 
What is a capital investment? 
  
using money to buy goods or services
 
  
issuing shares of stock of the corporation
 
  
authorizing and issuing shares of common stock by a multinational corporation  
  
committing resources to projects that have costs and benefits well into the future  
Correct!
 
Question 2
2 / 2 pts
Estimating the expected cash inflows and outflows from proposed projects is performed in what step of the capital budgeting process?    Estimating the expected cash inflows and outflows from proposed projects is performed in what step of the capital budgeting process?   

  
project identification
 
  
project evaluation
 
Correct!
  
project monitoring
 
  
project review
 
 
Question 3
2 / 2 pts
Which capital budgeting technique is preferred in all major industrialized countries?  Which capital budgeting technique is preferred in all major industrialized countries?    
net present value
 
  
internal rate of return
 
  
payback period
 
  
none of the above
 
Correct!
 
Question 4
2 / 2 pts
Why is it believed that Japanese companies prefer the payback period over the discounted cash flow methods for evaluating capital investment alternatives?  Why is it believed that Japanese companies prefer the payback period over the discounted cash flow methods for evaluating capital investment alternatives?    

It is consistent with their corporate strategy of investing in new technology.  
  
Japanese companies compete using very short product life cycles.  
  
Cash flows over a long period of time are difficult to predict with much accuracy.  
  
All of the above
 
Correct!
 
Question 5
2 / 2 pts
Why is the multinational capital budgeting process more complex than capital budgeting in a domestic environment?  Why is the multinational capital budgeting process more complex than capital budgeting in a domestic environment?    

Cash flows must be predicted.
 
  
An appropriate discount rate must be selected.
 
  
There are additional risks involved.
 
Correct!
  
The payback period is shorter.
 
 
Question 6
2 / 2 pts
Schlamp & Co. is considering building a manufacturing facility in Country Z, which has changed it labor laws frequently and dramatically in the past decade.  What kind of risk is created by these legislative actions?  Schlamp & Co. is considering building a manufacturing facility in Country Z, which has changed it labor laws frequently and dramatically in the past decade.  What kind of risk is created by these legislative actions?    

physical risk
 
  
political risk
 
Correct!
  
financial risk
 
  
economic risk
 
 
Question 7
2 / 2 pts
Hyperinflation causes what kind of risk for a multinational corporation?  Hyperinflation causes what kind of risk for a multinational corporation?    
economic risk
 
Correct!
  
physical risk
 
  
financial risk
 
  
political risk
 
 
Question 8
2 / 2 pts
The possibility of loss due to unexpected changes in currency values or interest rates is called:  The possibility of loss due to unexpected changes in currency values or interest rates is called:    

economic risk
 
  
business risk
 
  
financial risk
 
Correct!
  
political risk
 
 
Question 9
2 / 2 pts
Cash flows related to a proposed capital investment project are subject to what kind of risk?  Cash flows related to a proposed capital investment project are subject to what kind of risk?    
economic risk
 
  
financial risk
 
  
political risk
 
  
all of the above
 
Correct!
 
Question 10
0 / 2 pts
Skip to question text.
Johnson Ltd determined that the net present value of an investment in technological improvements at its plant in France would be €10,000,000 if pending litigation was resolved in the company's favor and would be €2,000,000 if the courts ruled against the company.  Johnson's attorneys in France...
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