Consider a U

question 92

Multiple Choice

Consider a U.S.-based MNC with a wholly-owned French subsidiary. Following a depreciation of the dollar against the euro, which of the following best describes the mechanism of any effect of the depreciation?

• A)The change in the cash flow in euro due an alteration in the firm's competitive position in the marketplace is in part a function of the elasticity of demand for the firm's product.
• B)A given operating cash flow in euro will be translated to a higher U.S. dollar cash flow regardless of the firm's hedging program.
• C)Both a and b
• D)None of the above

---

Definitions:

Legal Interest Rate

The maximum rate of interest that lenders can legally charge borrowers, often set by law or regulation.

Economic Profits

Profits that exceed the opportunity costs of all resources used by a firm, including both explicit and implicit costs.

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenue, as recorded in the financial statements.

Explicit Costs

Costs that involve direct monetary payment by a business to purchase or maintain resources.