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Chapter 5: Q9DQ (page 680)

What factors beyond the normal domestic analysis go into a financial feasibility study for a multinational firm?

Short Answer

Expert verified

Factors considered for studying the financial feasibility of the multinational firm:

1. Foreign exchange fluctuations

2. Political interference:

3. Tax system

Step by step solution

01

Definition of Multinational Firm

A business entity operating in domestic and foreign countries is a multinational firm. These types of business entity generate employment in other countries as well.

02

Factors beyond the domestic analysis

Following are the factors that go beyond the normal domestic analysis while studying the financial feasibility of the multinational firm:

1. Foreign exchange fluctuations: The study must evaluate the degree of fluctuation in the foreign exchange rate of the country where the business entity wishes to invest.

2. Political interference: Extent of political interference in the country in which the MNC wishes to invest.

3. Tax system: The tax procedure and the country’s tax system.

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Most popular questions from this chapter

Explain how exports and imports tend to influence the value of a currency

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List the factors that affect the value of a currency in foreign exchange markets.

A Peruvian investor buys 150 shares of a U.S. stock for \(7,500 (\)50 per share). Over a year, the stock goes up by \(4 per share.

  1. If there is a 10 percent gain in the value of the dollar versus the Peruvian nuevo sol, what will be the total percentage return to the Peruvian investor? First, determine the new dollar value of the investment and multiply this figure by 1.10. Divide this answer by \)7,500 and get a percentage value, and then subtract 100 percent to get the percentage return.
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