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The valuations of many multinational corporations declined by over 10% following the September 11 terrorist attacks even if they were not directly impacted. The expected cash flows of these companies were reduced due to a decline in travel hurting travel-related industries, weaker economies as a result of less travel, increased costs of international trade from tighter restrictions, and additional security expenses incurred to protect employees.
The valuations of many multinational corporations declined by over 10% following the September 11 terrorist attacks even if they were not directly impacted. The expected cash flows of these companies were reduced due to a decline in travel hurting travel-related industries, weaker economies as a result of less travel, increased costs of international trade from tighter restrictions, and additional security expenses incurred to protect employees.
The valuations of many multinational corporations declined by over 10% following the September 11 terrorist attacks even if they were not directly impacted. The expected cash flows of these companies were reduced due to a decline in travel hurting travel-related industries, weaker economies as a result of less travel, increased costs of international trade from tighter restrictions, and additional security expenses incurred to protect employees.
16. Impact of September 11. Following the terrorist attack on the U.S.
, the valuations of many
MNCs declined by more than 10 percent. Explain why the expected cash flows of MNCs were reduced, even if they were not directly hit by the attacks. ANSWER: An MNCs cash flows could be reduced in the following ways. First, a decline in travel would affect any MNCs that have business in travel-related industries. The airline, hotel, and tourist-related industries were expected to experience a decline in business. Layoffs were announced immediately by many of these MNCs. Second, these effects on travel-related industries can carry over to other industries, and weaken economies. Third, the cost of international trade increased as a result of tighter restrictions on some products. Fourth, some MNCs incurred expenses as a result of increasing security to protect their employees.