Consider a U.S.-based MNC with a wholly-owned German subsidiary. Following a dep

Question

Consider a U.S.-based MNC with a wholly-owned German subsidiary. Following a depreciation of the dollar against the euro, which of the following describes the conversion effect of the depreciation? Question 2 options There will be no change in the firm's competitive position in the marketplace A given opcrating cash flow in eure will be translated to a higher U.S. dollar cash flow a) andb) None of the above h" Translation exposure: Question 3 options: can affect reported home currency carnings even if the foreign denominated eanings do not change can only affoct reported home currency eansings if the foreign denominated carnings change docs not affect reported camings, it only impacts the balance sheet pone of the above are trae What kind of integration is vertical integration? Question 4 options: When the govemment outlaws discrimination against both short and tall poople When two frms join together in a conglomerate merger When two firms relaed in the production processaxre owned by the same 5irm, as in a plywood manufacnurer owning a logs company All of the above Tax neutrality: Question 5 options: Has its foundations in principles of economic efficiency and oquty Cas be a difficult prisciple to apply in practice Is determined by three criteria capital expont neutrality, capital import neutrality and national neucrality All of the above Sec 1 Pages: Words: 69 of 100% 23

Explanation / Answer

Question 2:

A given operating cash flow in Euro will be translated to a higher U.S. dollar cash flow

Question 3:

Translation exposure can only affect reported home currency earnings if the foreign denominated earnings change

Question 4:

Vertical integration is when two firms related in the production process are owned by the same firm, as in a plywood manufacturer owning a log company.

Question 5:

For Tax neutrality all of the above options apply

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