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:

Unlearned Response

A natural, reflexive reaction that occurs without previous conditioning or learning, such as an instinctual or innate behavior.

Classical Conditioning

A conditioning process where two stimuli are paired together multiple times, leading to a response that was first triggered by the second stimulus to later be triggered by the first stimulus.

Unconditioned Stimulus

In traditional conditioning, a stimulus inherently and spontaneously elicits a reaction without needing prior knowledge.

Lime Margaritas

A cocktail made with lime juice, tequila, and triple sec, often served with salt on the rim of the glass.