An MNC Will Likely Benefit Most from Diversifying If

question 33

Multiple Choice

An MNC will likely benefit most from diversifying if:

• A)the correlations between country economies are high.
• B)the correlations between country economies are low.
• C)the variability of all country economy levels is high.
• D)B and C

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Definitions:

Replacement Chain

A method for analyzing and comparing the economic life of alternative investment projects by equalizing their life spans through repeated investments.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Equivalent Annual Annuity

A financial concept used to evaluate the annual return of an investment over its lifetime, making it easier to compare the effectiveness of different investment opportunities.

Cost of Capital

The benchmark earnings rate a company must meet with its investments to maintain its price in the market and draw in backers.