Question

question 61

The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed:

Select one:

a. working capital management.

b. capital structure.

c. Anglo-American activism.

d. corporate governance.

Question 62

A foreign subsidiary''s functional currency is the currency of the primary economic environment in which the subsidiary operates and in which it generates cash flows.

Select one:

True

False

Question 63

The primary objective of multinational tax planning is to minimize the firm's worldwide tax burden.

Select one:

True

False

Question 64

If a firm undertakes a project with ordinary cash flows and estimates that the firm has a positive NPV, then the IRR will be:

Select one:

a. cannot be determined from this information

b. greater than the cost of capital.

c. less than the cost of capital.

d. greater than the cost of the project.

Question 65

Under a floating exchange rate system, the government bears the responsibility to ensure that the BOP is near zero.

Select one:

True

False

Answer 1

61.corporate governance is the relationship among the shareholders who are primary investors in an organization and the managers who run a business and are primarily responsible for all the decision making .

corporate governance aims to reduce the friction between them and make sure the managers work for the ebst interest of the shareholders that is to maximize the value of the firm.

the correct option is option d.

62. the statement is true .

functional currency refers to the main currency in which an economic entity operates and performs all the business operations. The reporting currency, is the currency in which the subsidiary reports its financial performance to the parent company. suppose, a firm in the USA , has it's subsidiary in India, then the functional currency will be Indian rupees and the reporting currency will be the US dollars.

63. this statement is correct.

the primary objective of the multi national tax planning is to minimize the taxes paid by them through the under reporting of profits ,claiming of recharges or royalties or technical fees . large MNC'S uses the difference in the tax rates and the preferential treatment of taxes for certain activities and income to reduce their tax burden.

64. any project can be accepted when the

1) NPV IS POSITIVE : it is the difference between the initial investment in a project and the PV of all the cash flows .

only if this figure is positive then the project will create value, if this project will create value. if this figure is negative, the project will destroy value for the project.

2) the IRR, which is the internal rate of return of a project. it is the rate at which the NPV is zero. the IRR should be greater than the hurdle rate i.e the cost of capital, the minimum return required by the investors for invetsing their money in a project .

the correct option is b, the IRR should be grater than the cost of capital.

65. false.

BOP : is the difference in the economic transactions happening between the domestic currency and the foreign currency.

BOP is composes of the capital account and the current account. in a fixed exchange system our currency is pegged against a foreign currency, so the government ensures that the BOP is zero. in a floating exchange the government has no responsibility as such to peg its currency .