FIN 4604 FINAL EXAM REVISION. ALL EXAM REVISION QUESTIONS AND CORRECT ANSWERS (ALREADY GRADED A+) (2024 UPDATE)
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Course
FINC - Finance
Institution
FINC - Finance
FIN 4604 FINAL EXAM REVISION. ALL EXAM REVISION QUESTIONS AND
CORRECT ANSWERS (ALREADY GRADED A+) (2024 UPDATE).
Which of the following firms would find a factor most useful? - ANSWER- RC Cola, which
periodically ships a small order of soft drinks overseas
The value of the multinational finan...
FIN 4604 FINAL EXAM REVISION. ALL EXAM REVISION QUESTIONS AND
CORRECT ANSWERS (ALREADY GRADED A+) (2024 UPDATE)
Which of the following firms would find a factor most useful? - ANSWER- RC Cola, which
periodically ships a small order of soft drinks overseas
The value of the multinational financial system is NOT based on the ability to take advantage of -
ANSWER- differing political systems between subsidiaries
Tax arbitrage - ANSWER- occurs when firms move funds to lower tax jurisdictions
MNCs may use _______ arbitrage to resist government price controls or union wage pressures. -
ANSWER- regulatory
Subsidiaries A and B buy from and sell to each other. Suppose that A has excess cash, whereas B
is short of cash. How can A funnel money to B? - ANSWER- a and b only (A can lead payments
owed to B and B can lag payments owed to A)
_______ is the pricing of internally traded goods for the purpose of moving profits to a more tax-
friendly nation. - ANSWER- Transfer pricing
Using transfer prices may lead to _______. - ANSWER- reduced ad valorem tariffs
Reinvoicing centers are usually set up in _______ jurisdictions. - ANSWER- low-tax
One disadvantage of a reinvoicing center is _______. - ANSWER- more communications costs
One advantage of the use of fees or royalties to manage the MNC's cash flow is _______. -
ANSWER- less suspicion by the host government
, Intercompany loans are useful during periods of _______ in the financial markets. - ANSWER-
credit rationing
_______ from the subsidiary to the parent is still the MOST important method of transferring funds
in the MNC. - ANSWER- Dividends
Which one of the following is a real rather than a financial flow? - ANSWER- capital goods
Which one of the following is an example of a market imperfection in the domestic capital market?
- ANSWER- ceilings on interest rates
Which one of the following would government taxing authorities NOT use to establish arm's length
pricing? - ANSWER- the law of one price
Leading and lagging is primarily of value because of - ANSWER- tax regulations
Suppose a firm earns $2.5 million before tax in Spain. It pays Spanish tax of $1.3 million and
remits the remaining $1.2 million as a dividend to its U.S. parent. The Spanish dividend
withholding tax is 5%. Under current U.S. tax law, the parent will owe U.S. tax on this dividend
equal to - ANSWER- nothing. It will also receive a foreign tax credit equal to $510,000.
Suppose affiliate A sells goods worth $1 million monthly to affiliate B on 30 day credit terms. A
switch in credit terms to 120 days will involve a one time shift in cash of - ANSWER- $3
million from A to B
The best way(s) to increase the present value of after tax remittances from overseas is (are) to -
ANSWER- invest parent funds as debt rather than equity
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