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

question 53

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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Definitions:

Transparent

Characterized by openness, communication, and accountability, allowing for clear visibility into processes, operations, or transactions.

Trading Volume

The total quantity of shares or contracts traded for a specific security or market during a specified period.

General Claim

A broad assertion or demand for rights, money, or property without specificity or restriction.

Collateral Bond

A type of bond that is secured by a specific pledge of collateral.