A US-Based MNC Has Just Established a Subsidiary in Algeria

question 56

Multiple Choice

A U.S.-based MNC has just established a subsidiary in Algeria. Shortly after the plant was built, the MNC determines that its exchange rate forecasts, which had previously indicated a slight appreciation in the Algerian dinar, were probably false. Instead of a slight appreciation, the MNC now expects that the dinar will depreciate substantially due to political turmoil in Algeria. This new development would likely cause the MNC to:

• A) lower its estimate of the previously computed NPV.
• B) increase its estimate of the previously computed NPV.
• C) lower its estimate of the previously computed NPV, but not necessarily if the MNC invests enough in Algeria to offset the decrease in NPV.
• D) increase its estimate of the previously computed NPV, but not necessarily if the MNC reduces its investment in Algeria by an offsetting amount.
• E) None of these are correct.

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Definitions:

Resource Constraint

Limitations or restrictions on available resources, such as time, money, or manpower, which can affect project outcomes or business operations.

Scarcity

This refers to the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Full-Time Employment

A work status involving employees who typically work a minimum number of hours defined by their employer, often with benefits and salaries.

Skills

The abilities and expertise that enable an individual to perform tasks effectively.