The Adjusted Present Value (APV) Model That Is Suitable for an MNC

question 68

Multiple Choice

The adjusted present value (APV) model that is suitable for an MNC is the basic net present value (NPV) model expanded to

• A)distinguish between the market value of a levered firm and the market value of an unlevered firm.
• B)discern the blocking of certain cash flows by the host country from being legally remitted to the parent.
• C)consider foreign currency fluctuations or extra taxes imposed by the host country on foreign exchange remittances.
• D)all of the above

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Definitions:

Expiration

The point in time when a financial contract such as an option or futures contract ceases to exist.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Put Option

An economic arrangement that offers the holder a privilege, absent any mandate, to liquidate a specified quantum of a core asset at a stipulated price throughout a fixed duration.

Expiration

The point in time when a financial contract (e.g., option, futures contract) reaches its end date and is either executed or becomes void.