CH 14 INT FINANCE
The public pathway to raise equity capital outside of its home market includes the following EXCEPT: Question content area bottom Part 1 A. Strategic Partner/Alliance B. seasoned offering C. shares sold to a specific market or exchange D. Euroequity issue
A
TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro appreciates against the dollar from $1.40/€ at the time the loan was made to $1.45/€ at the end of the first year, what is the before tax cost of capital if the firm repays the entire loan plus interest (rounded)? Question content area bottom Part 1 A. 9.27% B. 5.50% C. 10.50% D. 1.73%
A
TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro depreciates against the dollar from $1.40/€ at the time the loan was made to $1.35/€ at the end of the first year, how much interest will TropiKana pay at the end of the first year (rounded)? Question content area bottom Part 1 A. $74,250 B. €74,250 C. $55,000 D. $77,000
A
A/An ________ is defined as one that is targeted at investors in a single country and underwritten in whole or part by investment institutions from that country. Question content area bottom Part 1 A. Euroequity public issue B. directed public share issue C. strategic alliance D. SEC rule 144a placement
B
A ________ is a bond underwritten by a syndicate from a single country, sold within in that country, denominated in that country's currency, but the issuer is from outside that country. Question content area bottom Part 1 A. Eurobond B. foreign bond C. domestic bond D. none of the above
B
In theory, the MNE should support ________ debt ratios than a purely domestic firm because their cash flows are ________. Question content area bottom Part 1 A. higher; less stable due to international diversification B. higher; more stable due to international diversification C. lower; more stable due to international diversification D. lower; less stable due to international diversification
B
Which of the following is a characteristic of an euroequity issue? Question content area bottom Part 1 A. the issuers are located in Europe B. is an offering on multiple exchanges in multiple countries at the same time C. the investors are located in Europe D. an initial public offering of euro denominated securities
B
Which of the following is the typical order of sourcing capital abroad? Question content area bottom Part 1 A. cross listing the outstanding issues on other exchanges, then an international bond issue, then an international bond issue in the target market B. an international bond issue in less prestigious markets, then an international bond issue in the target market, and ultimately a eurobond issue C. an international bond issue in the target market, then cross listing the outstanding issues on other exchanges, then an international bond issue D. an international bond issue, then cross listing the outstanding issues on other exchanges, then an international bond issue in the target market
B
________ are negotiable certificates issued by a bank to represent the underlying shares of stock, which are held in trust at a foreign custodian bank. Question content area bottom Part 1 A. International mutual funds B. Depositary receipts C. Eurodeposits D. Negotiable CDs
B
Empirical evidence shows that new issues of equity by domestic firms in the U.S. market typically has a ________ stock price reaction and new equity issues in the U.S. markets by foreign firms with segmented domestic markets have a ________ stock price reaction. Question content area bottom Part 1 A. positive; negative B. negative; negative C. negative; positive D. positive; positive
C
For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________. Question content area bottom Part 1 A. decreases; decreases B. decreases; increases C. increases; increases D. increases; decreases
C
For the most part, U.S. SEC disclosure requirements are ________ other, non−U.S. equity market rules. Question content area bottom Part 1 A. less stringent than B. equally stringent to C. more stringent than D. none of the above
C
Level III ADR commitment applies to: Question content area bottom Part 1 A. banks issuing foreign mutual funds. B. firms that want to list existing shares on the NYSE. C. the sale of a new equity issued in the United States. D. ADR issues of under $25,000.
C
Question content area top Part 1 MNEs situated in countries with small illiquid and segmented markets are most like: Question content area bottom Part 1 A. large U.S. MNEs in that they are all MNEs and have worldwide markets and sources of financing. B. small domestic U.S. firms in that they have a strong niche market in the U.S. C. small domestic U.S. firms in that they must rely on internally generated funds and bank borrowing. D. None of the above is true.
C
By cross listing and selling its shares on a foreign stock exchange, a firm typically tries to accomplish which of the following? Question content area bottom Part 1 A. improve the liquidity of its existing shares B. increase its share price C. increase the firm's visibility D. all of the above
D
Eurobanks are: Question content area bottom Part 1 A. financial intermediaries that simultaneously bid for time deposits in and make loans in a currency other than that of the currency of where it is located. B. major world banks that conduct a Eurocurrency business in addition to normal banking activities. C. banks where Eurocurrencies are deposited. D. All of the above are descriptions of a Eurobank.
D
Eurocredits are: Question content area bottom Part 1 A. usually for maturities of six months or less. B. typically variable rate and tied to the LIBOR. C. bank loans to MNEs and others denominated in a currency other than that of the country where the bank is located. D. All of the above are true.
D
Not all firms have the same optimal capital structure. Factors that might influence a firm's capital structure include: Question content area bottom Part 1 A. the collateral value of its assets. B. the volatility of its sales and operating income. C. the industry in which it operates. D. all of the above
D
TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro appreciates against the dollar from $1.40/€ at the time the loan was made to $1.45/€ at the end of the first year, how much interest and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest (rounded)? Question content area bottom Part 1 A. $1,477,000 B. $1,055,000 C. €1,529,750 D. $1,529,750
D
Which of the following is NOT a factor offsetting the tax advantage of debt as a source of financing? Question content area bottom Part 1 A. increased agency costs B. alternative tax shields to those supplied by interest payments C. increased probability of financial distress (bankruptcy) due to fixed interest payments D. All of the above offset the tax advantage of debt as a source of financing.
D
