Fundamentals of Multinational Finance 3e Moffett.docx

1、Fundamentals of Multinational Finance 3e MoffettFundamentals of Multinational Finance, 3e (Moffett) Chapter 12 Global Cost and Availability of Capital12.1 Multiple Choice and True/False Questions1) If a firm lies within a country with _ or _ domestic capital markets, it can achieve lower global cost

2、 and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets. A) liquid; segmented B) liquid; large C) illiquid; segmented D) large; illiquid Answer: C Topic: Illiquid and Segmented Markets Skill: Recognition2) Other things eq

3、ual, a firm that must obtain its long-term debt and equity in a highly illiquid domestic securities market will probably have a _. A) relatively low cost of capital B) relatively high cost of capital C) relatively average cost of capital D) cost of capital that we cannot estimate from this question

4、Answer: B Topic: Cost of Capital Skill: Recognition3) Relatively high costs of capital are more likely to occur in _. A) highly illiquid domestic securities markets B) highly liquid domestic securities markets C) unsegmented domestic securities markets D) none of the above Answer: A Topic: Cost of C

5、apital Skill: Recognition4) Reasons that firms may find themselves with relatively high costs of capital include: A) The firms reside in emerging countries with undeveloped capital markets. B) The firms are too small to easily gain access to their own national securities market. C) The firms are fam

6、ily owned and they choose not to access public markets and lose control of the firm. D) All of the above. Answer: D Topic: Reasons for a High Cost of Capital Skill: Recognition5) A national securities market is segmented if the required rate of return on securities in that market differs from compar

7、able securities traded in other, unsegmented markets. Answer: TRUE Topic: Segmented Markets Skill: Recognition 6) Which of the following is NOT a contributing factor to the segmentation of capital markets? A) excessive regulatory control B) perceived political risk C) anticipated foreign exchange ri

8、sk D) All of the above are contributing factors. Answer: D Topic: Factors of Segmented Markets Skill: Recognition7) Which of the following is NOT a contributing factor to the segmentation of capital markets? A) lack of transparency B) asymmetric availability of information C) insider trading D) All

9、of the above are contributing factors. Answer: D Topic: Factors of Segmented Markets Skill: Recognition8) Which of the following is NOT a key variable in the weighted average cost of capital (WACC) equation? A) the market value of equity B) the market value of debt C) the risk-free rate of return D)

10、 the marginal tax rate Answer: C Topic: WACC Skill: Recognition9) The weighted average cost of capital (WACC) is A) the required rate of return for all of a firms capital investment projects. B) the required rate of return for a firms average risk projects. C) not applicable for use by MNE. D) equal

11、 to 13%. Answer: B Topic: WACC Skill: Recognition10) Which of the following is NOT a key variable in the weighted average cost of capital (WACC) equation? A) the before tax cost of debt B) the risk-adjusted cost of equity C) the beta of the market portfolio D) the total market value of the firms sec

12、urities Answer: C Topic: WACC Skill: Recognition11) Other things equal, an increase in the firms tax rate will increase the WACC for a firm that has both debt and equity financing. Answer: FALSE Topic: WACC Skill: Conceptual 12) The capital asset pricing model (CAPM) is an approach A) to determine t

13、he price of equity capital. B) used by marketers to determine the price of saleable product. C) can be applied only to domestic markets. D) none of the above. Answer: A Topic: CAPM Skill: Conceptual13) Which of the following is NOT a key variable in the equation for the capital asset pricing model?

14、A) the risk-free rate of interest B) the expected rate of return on the market portfolio C) the marginal tax rate D) All are important components of the CAPM. Answer: C Topic: CAPM Skill: Recognition14) _ risk is a function of the variability of expected returns of the firms stock relative to the ma

15、rket index and the measure of correlation between the expected returns of the firm and the market. A) Systematic B) Unsystematic C) Total D) Diversifiable Answer: A Topic: Systematic Risk Skill: Recognition15) Systematic risk A) is the standard deviation of a securities returns. B) is measured with

16、beta. C) is measured with standard deviation. D) none of the above. Answer: B Topic: Systematic Risk Skill: Recognition16) If a firms expected returns are more volatile than the expected return for the market portfolio, it will have a beta less than 1.0. Answer: FALSE Topic: Beta Skill: Conceptual 1

17、7) Which of the following is generally unnecessary in measuring the cost of debt? A) a forecast of future interest rates B) the proportions of the various classes of debt a firm proposes to use C) the corporate income tax rate D) All of the above are necessary for measuring the cost of debt. Answer:

18、 D Topic: Cost of Debt Skill: Recognition18) The after-tax cost of debt is found by A) dividing the before-tax cost of debt by (1 - the corporate tax rate). B) subtracting (1 - the corporate tax rate) from the before-tax cost of debt. C) multiplying the before-tax cost of debt by (1 - the corporate

19、tax rate). D) subtracting the corporate tax rate from the before-tax cost of debt. Answer: C Topic: Cost of Debt Skill: Conceptual19) The WACC is usually used as the risk-adjusted required rate of return for new projects that are of the same average risk as the firms existing projects. Answer: TRUE

20、Topic: WACC Skill: Conceptual20) A firm whose equity has a beta of 1.0 A) has greater systematic risk than the market portfolio. B) stands little chance of surviving in the international financial market place. C) has less systematic risk than the market portfolio. D) None of the above is true. Answ

21、er: D Topic: Beta Skill: Conceptual21) One of the elegant beauties of international equity markets is that over the last 100 or so years, the average market risk premium is almost identical across major industrial countries. Answer: FALSE Topic: Market Risk Premium Skill: Recognition22) The differen

22、ce between the expected (or required) return for the market portfolio and the risk-free rate of return is referred to as _. A) beta B) the geometric mean C) the market risk premium D) the arithmetic mean Answer: C Topic: The Market Risk Premium Skill: Recognition 23) In general the geometric mean wi

23、ll be _ the arithmetic mean for a series of returns. A) less than B) greater than C) equal to D) greater than or equal to Answer: A Topic: Geometric and Arithmetic Mean Skill: Recognition24) The beginning share price for a security over a three-year period was $50. Subsequent year-end prices were $6

24、2, $58 and $64. The arithmetic average annual rate of return and the geometric average annual rate of return for this stock was A) 9.30% and 8.78% respectively. B) 9.30% and 7.89% respectively. C) 9.30% and 7.03% respectively. D) 9.30% and 6.37% respectively. Answer: D Topic: Arithmetic and Geometri

25、c Average Returns Skill: Analytical25) If a company fails to accurately predict its cost of equity, then A) the firms wacc will also be inaccurate. B) the firm may not be using the proper interest rate to estimate NPV. C) the firm my incorrectly accept or reject projects based on decisions made usin

26、g the cost of capital computed with an incorrect cost of equity. D) all of the above are true. Answer: D Topic: Cost of Equity Skill: Conceptual26) The primary goal of both domestic and international portfolio managers is A) to maximize return for a given level of risk, or minimize risk for a given

27、level of return. B) minimize the number of unique securities held in their portfolio. C) maximize their wacc. D) all of the above. Answer: A Topic: Investment Objectives Skill: Conceptual27) Internationally diversified portfolios often have a lower rate of return and almost always have a higher leve

28、l of portfolio risk than their domestic counterparts. Answer: FALSE Topic: Portfolio Diversification Skill: Conceptual 28) Which of the following is NOT a portfolio diversification technique used by portfolio managers? A) diversify by type of security B) diversify by the size of capitalization of th

29、e securities held C) diversify by country D) All of the above are diversification techniques. Answer: D Topic: Portfolio Diversification Skill: Recognition29) If all capital markets are fully integrated, securities of comparable expected return and risk should have the same required rate of return in each national market after adjusting for _. A) time of day and language requirements B) political risk and time lags C) foreign exchange risk and political risk D) foreign exchange risk and the spot rate Answer: C Topic: Market Segmentation Skill: Recognition30) Capi