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

question 33

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 ____ its estimate of the previously computed net present value.

• A)lower
• B)increase
• C)lower, but not necessarily if the MNC invests enough in Algeria to offset the decrease in NPV
• D)increase, but not necessarily if the MNC reduces its investment in Algeria by an offsetting amount
• E)none of the above

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