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1. Company Y records a receivable from a foreign customer in Company Y's functional currency. The receivable is due in 90 days and is to be paid in the customer s currency. This is an example of which type of risk exposure?
A) Translation risk
B) Foreign investment risk
C) Economic risk
D) Transaction risk
2. K Malone is a successful entrepreneur, Currently she is considering investing in a capital protect, which would benefit tourism in North Caroina Because of tourism, the State of North Carolina is willing to lent) her
$150,000 at a rate of 5%. well below the market rate Her estimated net cash flows for the 3-year lifetime of the project are S15 000 $89,000 and $60,000 respectively Recommend whether or not Malone should undertake this project.
A) She should undertake this project because the net present value (NPV) is $31,022.
B) She should not undertake this project because the net present value NPV is ($14.051).
C) She should not undertake this protect because the net present value (NPV) is ($3.157)
D) She should undertake this project because the present value (PV) of this project is $146,843
3. Southwest Supplies Inc. (SSI) is considering the following two projects with cash-flows discounted at SSI's weighted average cost of capital.
SSI can only afford to invest in one of the projects. Which statement would most likely explain why SSI would choose Project B over project A?
A) Project B generates significantly more non-cash expenses
B) Project B cash-flows are to be received sooner
C) Project B cash-flows are relatively more certain
D) Project B results in a higher cumulative accounting income
4. Risk maps are used in companies' enterprise risk management system because risk maps
A) are a generic set of risks for the company's industry that can then be used as a foundation for further risk-identification techniques to specify the risks relevant for the company.
B) provide a quantitative tool that measures the probability of occurrence and the potential impact to calculate a potential loses
C) compares the impact of a risk and the likelihood of occurrence to provide a qualitative assessment of the risk
D) rank risks Based on the potential loss that could occur it a risk were to materialize
5. Identify the market structure in which OLI operates and explain how OLi's pricing is affected by this mantel structure Essay Online Learning Inc. lOLI) is a privately-held company based in the IUC that specializes in providing online courses in English as a Second Language (ESL). OLI is trying to set up a new sales office in a foreign country.
It needs a business license to operate in that country. The license normally lakes six months to obtain. An official of that country said that he could expedite the process for a fee of €300.
OLI estimates the new sales office can bring €300,000 incremental profit annually OLI has just launched a new online 40-houi course to help adult ESL learners master basic business English. The price of the new course is €500 per student, the variable cost is €300 per student, and the total fixed cost of the new course is
€300.000 per year OLI spent €200.000 to develop the new course before launching it. There are many online course providers in the marketplace, and each has its own feature However, OLI's highly qualified staff and good reputation have enabled it to charge a premium price compared to its major competitors. Recent market research indicates that if OLI raises the price of its new business English course by 10V the student enrollment would decrease by 5V A regional airlines company in Asia has approached OLI and offered to enroll 1.000 of its employees in the new course if OLI would agree to a special price of €350 per employee If OLI accepts this offer, an additional €10,000 onetime cost would be required to temporally expand its capacity to accommodate the new students.
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: B | Question # 3 Answer: B | Question # 4 Answer: C | Question # 5 Answer: Only visible for members |
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