Investment in Foreign Subsidiaries Is Less Risky When

question 9

Multiple Choice

Investment in foreign subsidiaries is less risky when:

• A)laws in the host country that apply to repatriate earnings are complex.
• B)the host country has higher tax rates.
• C)the host country is politically unstable.
• D)exchange rates are volatile.
• E)the subsidiaries are geographically (globally) diversified.

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Definitions:

Free Cash Flows

The amount of cash a company generates after accounting for capital expenditures needed to maintain or expand its asset base.

Capital Structure

The capital structure is the mix of a company's long-term debt, short-term debt, common equity, and preferred equity, representing how a firm finances its overall operations and growth through various sources of funds.

Free Cash Flow to Equity

The amount of cash that could be potentially distributed to shareholders after all expenses, reinvestments, and debt repayments have been taken care of.

Levered Beta

A measurement of the volatility of a stock, including the impact of the company's debt, relative to the market as a whole.