An MNC Is Considering Establishing a Two-Year Project in New

question 18

Multiple Choice

An MNC is considering establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12%. The required rate of return on this project is 18%. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes, and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value?

• A) about NZ$11 million.
• B) about NZ$15 million.
• C) about NZ$31 million.
• D) about NZ$37 million.
• E) about NZ$25 million.

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Definitions:

Divisional Structure

An organizational layout where the company is divided into semi-autonomous units or divisions, each focused on a specific product line or geographic area.

Multidivisional Structure

A form of organizational structure where a company is divided into semi-autonomous divisions, each with its own set of functional units like marketing and finance.

Matrix Structure

An organizational structure that combines both functional and divisional departmentalization together with dual lines of authority.

Divisional Departmentalization

Organizing a business into divisions, each of which is responsible for its own set of related products, services, or market sectors.