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Unit 14: Real Options and Cross-border Investments




          14.7 Review Questions                                                                 Notes

          1.   Discuss the various methods which MNCs adopt to for their international business.
          2.   What are the advantages and disadvantages of joint ventures from the viewpoint of the:
               (a)  MNC

               (b)  Host country
          3.   Compare licensing to foreign investment from the viewpoint of the:
               (a)  Host country
               (b)  Multinational firm

               (c)  Host country firm
          4.   Briefly discuss the global trends in FDI in the last five years and comment upon your
               results.
          5.   Briefly discuss the motives for increasing cross border investments by various corporations.

          6.   FDI inflows into India are around (3.4%) which is very low when compared other
               developing Asian economies like China (46.8%) and Hong Kong (22.8%). What policy
               measures do you think the regulatory authorities should initiate to attract more FDI
               inflows into the country?
          7.   In spite of a surplus in both the current account and capital account, India has been unable
               to attract global investors. Indian exports have been witnessing a constant decline when
               compared to other countries such as China and Hong Kong. What additional measures are
               required to tackle these problems?
          8.   “The successes and failure of programmes meant for attracting the FDI should be gauged
               by the size and rapidity with which the FDI flows in response to the initiative of the
               government. The other parameter that also measures the confidence of the investors is the
               demand of guarantees or any kind of payment security. If the investors are ensured and
               comfortable with the system, they do not ask for such mechanism.” Comment.
          9.   Countries that attract FDI of large magnitudes do not treat money as a commodity. They
               regard FDI as an outcome of favourable perceptions. Elucidate.
          10.  “One of the interesting findings of a survey that compares FDI in India with the FDI in
               China is: Though China is attracting FDI more than India, and given the fact that China
               started the reform programme”. Comment.

          Answers: Self Assessment

          1.   Abandon                          2.   Sequencing
          3.   Mix                               4.  Input
          5.   NPV                              6.   ROV

          7.   Strike                           8.   Option
          9.   Foreign Direct Investment (FDI)   10.  Political
          11.  Capital                          12.  True
          13.  False                            14.  False
          15.  True




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