Financing Corporate Expansion (Scenario)

question 80

Multiple Choice

Financing Corporate Expansion (Scenario)
Intensity Games is an MNE based in San Francisco that manufactures a popular line of video game consoles and accessories. Intensity owns manufacturing facilities in China and Russia, where the components of the game consoles are manufactured and assembled before being shipped around the world. Intensity also owns numerous subsidiaries that manufacture game cartridges for Intensity game platforms. Intensity managers have determined that the firm needs to expand its Chinese facility to accommodate the increasing demand. The firm needs to raise several million dollars to finance the expansion. The financial managers of Intensity are discussing the various financing options available to the firm.
-Which of the following questions would be more important for Intensity financial managers to evaluate when deciding the best method for the firm to raise funds?

• A) What percentage of stock is owned by the CEO of Intensity Games?
• B) How will the dividend be paid to shareholders if the firm expands its Chinese facility?
• C) What type of debt financing would be most economical for Intensity?
• D) At which bank does Intensity do the majority of its business transactions?

Recognize the impact of exchange rate fluctuations on international financial management and the strategies to hedge against them.

Grasp the concept of swap contracts and their applications in finance.

Comprehend the processes and tools for managing short-run and long-run financial risks.

Demonstrate knowledge of financial engineering and the creation of new financial instruments.