Finance and Accounting

1. Crusader Co. expects to receive 20 millioneuros in each of the next 10 years. It will need to obtain 4 million Mexican pesos in each of the next 10 years. The euro exchange rate is presently valued at $1.38 and is expected to depreciate by 3 percent each year over time. The peso is valued at $.13 and is expected to depreciate by 3 percent each year over time. Review the valuation equation for an MNC. Do you think that the exchange rate movements will have a favorable or unfavorable effect on the MNC?

What are agency costs?

Are agency costs larger for an MNC than for a purely domestic firm? Why or why not?

What is the theory of comparative advantage and explain how the theory relates to the need for international business?

What is the product cycle theory and explain how the theory relates to the growth of an MNC?
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