1. Multinational corporationsWhy do companies go global?Multinational corporations operate in locations across the world. Each company has its own motive for its presence in different countries.Consider the following case:Saltwater Logistics Corp.'s domestic demand has matured and leveled off. Consequently, the firm is looking to expand its operationsoverseas because it believes that its growth opportunities are more promising in foreign markets.Which of the following best describes the reason Saltwater Logistics Corp. has decided to go global?To seek production efficiencyTo avoid political, trade, and regulatory hurdlesTo broaden its marketsNow consider the case of Blue Box Crate Company. Many of Blue Box Crate Company's customers have expanded to India. Consequently, Blue BoxCrate Company has decided to expand its operations to India to better serve its customers. Blue Box Crate Company has decided to go global in orderto

The best describe reason for Saltwater Corp is “to seek production efficiency”.Justification: The…

Answered: 1. Multinational corporations Why do…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter1: Multinational Financial Management: An Overview

Section: Chapter Questions

Problem 4QA

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In its quest for global expansion Lewis Fabrication must examine its rationales for wanting to expand into the foreign marketplace. Which one of the following is not a reason why this company would want to expand globally? * To maximize shareholder wealth To minimize risk of failure for the business To increase the revenues of the company To cut costs of production for the company To reduce risks associated with business cycle fluctuations
Over the past two decades, the global economy has become increasingly integrated and more companies have generated more of their profits from overseas operations. Multinational corporations have more opportunities but also face different risks compared to companies that operate only in their home Discuss briefly the FOUR (4) advantages for corporations to go global in their business ventures.
Companies go global for various reasons. Although becoming a multinational corporation provides prospects for high returns and diversification, it makes financial management more complicated for financial executives and managers. Based on your understanding of the factors that complicate financial management in multinational firms, complete the following statement: Compared to domestic corporations, multinational corporations have risk from exchange rate fluctuations. Multinational versus domestic financial management According to the Bureau of Economic Analysis, the growth of capital expenses made by U.S. companies internationally was higher than the growth of investments made in domestic U.S. markets ("Summary Estimates for Multinational Companies: Employment, Sales, and Capital Expenditures for 2010," http://www.bea.gov/ newsreleases/international/mnc/2012/mnc2010.htm). While these companies might follow similar processes and concepts, their financial management tactics distinguish…
Increased global interaction has been promoted by advanced technology in communication, ideas and culture, which largely encourages and facilitates international trading. Businesses go abroad in seeking better financial incentives, stronger networks, and markets of opportunities. But at the same time, the complexities in terms or risks involved in international operation are more than domestic firms. How to manage cultural risks and other factors related to a foreign operation of a multinational business. Is cultural, business, or political risk more challenging to overcome than one of the others? Why or why not? How should American standards influence multinational businesses?
The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate One-Year Forward Exchange Rate Canadian dollar (U.S. dollar/Canadian dollar) 0.8932 0.9133 The current one-year interest rate on U.S. Treasury securities is 8.03%. If interest rate parity holds, what is the expected yield on one-year Canadian…
The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$) Spot Exchange Rate 0.8876 One-Year Forward Exchange Rate 0.9023 Canadian dollar (U.S. dollar/Canadian dollar) The current one-year interest rate on U.S. Treasury securities is 8.03%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk? O 6.27% O…
The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate One-Year Forward Exchange Rate Canadian dollar (U.S. dollar/Canadian dollar) 0.8798 0.8935 The current one-year interest rate on U.S. Treasury securities is 8.03%. If interest rate parity holds, what is the expected yield on one-year Canadian…
Increased global interaction has been promoted by advanced technology in communication, ideas and culture, which largely encourages and facilitates international trading. Businesses go abroad in seeking better financial incentives, stronger networks, and markets of opportunities. But at the same time, the complexities in terms or risks involved in international operation are more than domestic firms. Respond to the following in a minimum of 175 words: Discuss how to manage cultural risks and other factors related to a foreign operation of a multinational business. Is cultural, business, or political risk more challenging to overcome than one of the others? Why or why not? How should American standards influence multinational businesses?
The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. If a government intends to prevent its currency’s value from falling relative to other currencies, it will purchase its currency from sellers in the market. If the demand for a currency increases, the currency’s value will increase relative to other currencies. When a government limits imports and restricts foreign exchange transactions, its currency’s value tends…
Companies go global for various reasons. Although becoming a multinational corporation provides prospects for high returns and diversification, it makes financial management more complicated for financial executives and managers. Based on your understanding of the factors that complicate financial management in multinational firms, complete the following statement: Compared to domestic corporations, multinational corporations have (increased or reduced) risk from exchange rate fluctuations.
Assume that Al-Hassan Engineering Oman is involved in local and export business with subcontinent countries India, Pakistan and Bangladesh. In the tough domestic and international business competition, Al-Hassan Engineering is facing different industrial, international, domestic and firm-specific risks. Required: In view of facing above risks, what prudent strategies should be adopted by the management of Al-Hassan Engineering for its survival and consistent growth? (answer this question in details and in bullets rather in paragraph) detail explanation would be need

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