EFB240 Workshop 1 Questions Madura Chapter 1 Questions Agency Problems of MNCs.

EFB240 Workshop 1 Questions
Madura Chapter 1 Questions
Agency Problems of MNCs.
a. Explain the agency problem of MNCs.
b. Why might agency costs be larger for an MNC than for a purely domestic firm?
Comparative Advantage.
a. Explain how the theory of comparative advantage relates to the need for international business.
b. Explain how the product cycle theory relates to the growth of an MNC.
3. Imperfect Markets.
a. Explain how the existence of imperfect markets has led to the establishment of subsidiaries in foreign markets.
b. Suppose perfect markets existed. If perfect markets existed, would wages, prices, and interest rates among countries be more similar or less similar than under conditions of imperfect markets? Why?
4. International Opportunities.
Do you think that either the acquisition of a foreign firm or licensing will result in greater growth for an MNC? Which alternative is likely to have more risk?
b. Describe a scenario in which the size of a corporation is not affected by access to international opportunities.
c. Explain why MNCs such as Coca Cola and PepsiCo, Inc., still have numerous opportunities for international expansion.
5. International Opportunities Due to the Internet.
a. What factors cause some firms to become more internationalized than others?
b. Offer your opinion on why the Internet may result in more international business.
6. Impact of Exchange Rate Movements. Globe International of Melbourne has several Asian subsidiaries that remit earnings to it each year. Explain how appreciation of the Chinese Yuan would affect Globe International’s valuation.
7. Benefits and Risks of International Business. As an overall review of this chapter, identify possible reasons for growth in international business. Then, list the various disadvantages that may discourage international business.
8. Valuation of an MNC. Amart Sports, an Australian company, has a subsidiary in India, where political risk has recently increased. Amart’s best guess of its future Indian Rupee cash flows to be received has not changed. However, its valuation has declined as a result of the increase in political risk. Explain.
Madura Chapter 2 Questions
Balance of Payments.
What are the main components of the current account?
What are the main components of the financial account?
Inflation Effect on Trade.
a. How would a relatively high home inflation rate affect the home country’s current account, other things being equal?
b. Is a negative current account harmful to a country? Discuss.
3. Government Restrictions. How can government restrictions affect international payments among countries?
a. What are some of the major objectives of the IMF?
b. How is the IMF involved in international trade?
6. Demand for exports. A relatively small Australian balance-of-trade deficit is commonly attributed to a strong demand for Australian exports. What do you think is the underlying reason for the strong demand for Australian exports?
10. Effects of Tariffs. Assume a simple world in which the Australia exports beer to France and imports wine from France. If the Australia imposes large tariffs on the French wine, explain the likely impact on the values of the Australian beer companies, Australian wine producers, the French beer companies, and the French wine producers.

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