Q. Theory which considers change in exchange rate with fluctuations in inflation rates is classified as
✅ Correct Answer: (B)
purchasing power parity
International Financial Management MCQs and Notes
Q. Which of the following is a legitimate reason for international investment?
✅ Correct Answer: (C)
There are possible benefits from international diversification.
Q. With limited finance and a number of project proposals at hand, select that package of projects which has
✅ Correct Answer: (A)
The maximum net present value
Q. Following is (are) the method(s) for adjustment of risks
✅ Correct Answer: (C)
Both (A) and (B)
Q. A project may be regarded as high risk project when
✅ Correct Answer: (A)
It has smaller variance of outcome but a high initial investment
Q. Which one of the following represents the best estimate for a firm's pre-tax cost of debt?
✅ Correct Answer: (A)
the current yield-to-maturity on the firm's existing debt
Q. Capital structure weights are based on the:
✅ Correct Answer: (A)
market values of a firm's debt and equity.
Q. Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)?
✅ Correct Answer: (D)
The WACC can be used as the required return for all new projects with similar risk to that of the existing firm.
Q. The rate of return on its existing assets that a firm must earn to maintain the current value of the firm's stock is called the:
✅ Correct Answer: (C)
weighted average cost of capital.
Q. When computing the weighted average cost of capital, the weighting should be proportional based on the ______ rather than the _____ value of the firm.
✅ Correct Answer: (D)
market, book