Shortcomings of the dividend pricing models suggest that we need a pricing model that is more inclusive than the dividend models and that provides expected returns for companies based on aspects besides their historical dividend patterns. Which of these below is NOT one of these aspects?    A. the company's risk        B. the premium for taking on risk        C. the reward for waiting        D. stable dividends     Which of the statements below is NOT correct? A.  If two investment have the same expected return, the investment with the lower risk is preferred. B.  If two investment have the same expected return, the investment with the greater risk is preferred. C.  If two investments have the same expected risk, the investment with the higher expected return is preferred. D.  If one investment has a higher expected return and a greater level of risk than another, it's is not clear which investment is the preferred choice. Which of the choices below is FALSE A.  When issuing a puttable bond, the firm anticipates that interest rates will rise over the life of the bond. B.  When issuing a callable bond, the firm anticipates that interest rates will fall over the life of the bond. C.  When issuing a callable bond, the firm anticipates that interest rates will rise over the life of the bond. D.  A puttable bond is essentially the reverse of a callable bond. Project A has an NPV of $20,000 and a PI of 1.2. Project B has an NPV of $10,000 and a PIof 1.3. Both projects have equal lives. Which project should be preferred if we are NOT concerned with capital rationing (that is, we are NOT concerned with being short of funds) A) we should prefer Project B since it has a higher PI. B) We should compute the EAA before we make any decision. C) We should prefer Project A since it has a higher NPV. D) We should prefer Project B if it has a higher IRRBerra, Inc. is currently considering an eight-year project that has an initial outlay or cost of $120,000. The future cash inflows from its project for years 1 through 8 are the same at $30,000. Berra has a discount rate of 11%. Because of capital rationing (shortage of funds for financing), Berra wants to compute the profitability index (PI) for each project. What is the PI for Berra's current project? A) About 1.29 B) About 1.31 C) About 1.33 D) About 1.39 Shortcomings of the dividend pricing models suggest that we need a pricing model that is more inclusive than the dividend models and that provides expected returns for companies based on aspects besides their historical dividend patterns. Which of these be low is NOT one of these aspects ? A. the company's risk B. the premium for taking on risk C. the reward for wa.

1. Shortcomings of the dividend pricing models suggest that we
need a pricing model that is more inclusive than the dividend
models and that provides expected returns for companies based
on aspects besides their historical dividend patterns. Which of
these below is NOT one of these aspects?
A. the company's risk
B. the premium for taking on risk
C. the reward for waiting
D. stable dividends
Which of the statements below is NOT
correct?
A. If two investment have the same expected return, the
investment with the lower risk is preferred.
B. If two investment have the same expected return, the
investment with the greater risk is preferred.
C. If two investments have the same expected risk, the
investment with the higher expected return is preferred.
D. If one investment has a higher expected return and a greater
level of risk than another, it's is not clear which investment is

2. the preferred choice.
Which of the choices below is FALSE
A. When issuing a puttable bond, the firm anticipates that
interest rates will rise over the life of the bond.
B. When issuing a callable bond, the firm anticipates that
interest rates will fall over the life of the bond.
C. When issuing a callable bond, the firm anticipates that
interest rates will rise over the life of the bond.
D. A puttable bond is essentially the reverse of a callable bond.
Project A has an
NPV of $20,000 and a PI of 1.2. Project B has an NPV of
$10,000 and a PIof 1.3. Both projects have equal lives. Which
project should be preferred if we are NOT concerned with
capital rationing (that is, we are NOT concerned with being
short of funds)
A) we should prefer Project B since it has a higher PI.
B) We should compute the EAA before we make any decision.
C) We should prefer Project A since it has a higher NPV.
D) We should prefer Project B if it has a higher IRRBerra, Inc.
is currently considering an eight-year project that has an initial
outlay or cost of $120,000. The future cash inflows from its
project for years 1 through 8 are the same at $30,000. Berra has
a discount rate of 11%. Because of capital rationing (shortage of
funds for financing), Berra wants to compute the profitability
index (PI) for each project. What is the PI for Berra's current
project?
A) About 1.29 B) About 1.31 C) About 1.33 D) About 1.39

3. Shortcomings of the dividend pricing models suggest that we
need a pricing model that
is more inclusive than the dividend models and that provides
expected returns for
companies based on aspects besides their historical dividend
patterns. Which of these
be
low is NOT one of these aspects
?
A. the company's risk
B. the premium for taking on risk
C. the reward for waiting

4. D. stable dividends
W

5. hich
of the statements below is NOT correct?
A.
If two investment have
the same expected return, the investment with the
lower risk is preferred.
B.
If two investment have the same expected
return, the
investment with
the
greater
risk is preferred.
C.
If two investments
have
the same expected risk, the investment
with
th
e
higher expected return is preferred.

6. D.
If one investment has a higher expected return and a greater
level of risk
than another, it's is not clear which investment is the preferred
choice.
Which of the choices below is FALSE
A.
When issuing a puttable bond, the firm anticipates that interest
rates will
rise over the li
fe of the
bond.
B.
When
issuing
a
callable bond, the firm anticipates that interest rates will
fall over the life of the bond.
C.
When issuing a callable bond, the firm anticipates that interest
rates will
rise over the life of the bond.
D.

7. A puttabl
e bond is essentially the reverse of a callable bond.

8. Shortcomings of the dividend pricing models suggest that we
need a pricing model that
is more inclusive than the dividend models and that provides
expected returns for
companies based on aspects besides their historical dividend
patterns. Which of these
below is NOT one of these aspects?
A. the company's risk

9. B. the premium for taking on risk
C. the reward for waiting
D. stable dividends
Which of the statements below is NOT correct?
A. If two investment have the same expected return, the
investment with the
lower risk is preferred.
B. If two investment have the same expected return, the
investment with
the greater risk is preferred.
C. If two investments have the same expected risk, the
investment with the
higher expected return is preferred.
D. If one investment has a higher expected return and a greater
level of risk
than another, it's is not clear which investment is the preferred
choice.
Which of the choices below is FALSE
A. When issuing a puttable bond, the firm anticipates that
interest rates will
rise over the life of the bond.
B. When issuing a callable bond, the firm anticipates that
interest rates will
fall over the life of the bond.
C. When issuing a callable bond, the firm anticipates that
interest rates will

10. rise over the life of the bond.
D. A puttable bond is essentially the reverse of a callable bond.
Running head: Multinational Corporation Expansion: Chipotle
11
Multinational Corporation Expansion: Chipotle
Renzo Rey de Castro
Sergio Lareza
Strayer University
ITB-400
August 9th, 2015
Introduction
Chipotle is a company with many restaurants in the United
States of America, United Kingdom, Canada and Germany
among others. The company mission’s statement is called, the
food that has integrity. This company is one of the first chains
in terms of establishment of casual dining. Chipotle is a public
company that was founded in the year 1993 the month of July. It

11. has many branches across the world, and the number of
branches is16 (Bowen, 1978). It operates in 1700 locations. The
net income by the year 2013 was US$327.4 million according to
America reports.it has 45000 employees. Steve Ells founded it,
and its major headquarter is in Denver and Colorado. To this
end, this paper seeks to analyze the main strategies that
Chipotle a Multinational Corporation (MNC) will use to expand
its operation to the new markets in the country of Chile
(Saunders, Cornett and McGraw, 2006).
Analysis of three major dimensions of international and its
effects on chipotle venturing into Chile.
International finance essential to every company and
individuals, this is because people are living in the globalized
and economically integrated world. There is continued
international trade that is happening in the world which
internationalizes the consumption of goods and services across
the world. Now day’s activities such as production,
consumption, and investment are known to be highly globalized.
Therefore, it is must that Chipotle gets to understand the
international dimensions (Bowen, 1978).
Some of the dimensions that are part of international finance are
(1) market imperfections (2) foreign exchange and risks of
politics and the opportunity set for expansion. In elaboration of
political risks and foreign exchange risk, the financial markets
are so integrated. Therefore, there is high chance that Chipotle
is likely to be exposed to uncertainty during exchange rate. For
that matter, there is the likelihood of it engaging in transactions
across the border including Chiles, which is different from
domestic. Another risk that Chipotle may encounter is a
political risk. This risk ranges from tax rates, laws and right to
investigate the assets of the company. In this case, Chile has its
system of government which may be tough because it is a
sovereign country.
Secondly, market imperfections, these act as the main motivator
of chipotle to relocate to Chile. Some of the imperfections are
transactions, transport costs, tax discriminations and legal

12. restrictions (Bowen, 1978).
In expanded set opportunity, Chipotle will find it easy to locate
to Chile because there is the possibility of maximizing their
performance as they raise a lot of funds for the capital market.
Once the managers of chipotle are aware of investment
opportunity in Chile, they will diversify their investment to
benefit from the expanded market.
Economic trends and impact of globalization on the chipotle
industry
Currency
US dollar has played a key role as the dominant global
currency. This displaced the sterling pound that appeared to be
causing trade deficits. However, there is likelihood that euro
could also take over the market depending with the fluctuation
of the dollar. The emergency of euros an international currency
destabilized the economy many countries revealed their budget
deficit as weak European country turned into borrowing
(Saunders, Cornett and McGraw, 2006).
Comparative advantage
Theory of comparative advantage is also among principal in
different countries that involved in international trade. That
theory states that countries should specialize in the production
of goods they can effectively and efficiently produce. But it the
major implication is that one country benefits at the expense of
the other. This has led to the liberalization of international
trade(Saunders, Cornett and McGraw, 2006).
Cross Cultural Management Issues
A workforce that is cutting across different cultures and diverse
has been a reality in the present corporate world, especially if it
is a multinational company. The impact and overall effect of
cultural diversity vary with the nature of the business
environment and the strategy employed by the company or firm.
Proper management of cross-cultural issues help create an
advantage for the firm and gives the firm a competitive edge
over the rest(Bowen, 1978).
Diversity in the cultural factors includes gender, age, race,

13. color, physical ability, and ethnicity. Given the need to achieve
the company goals and properly utilize the diverse workforce,
management of cross-cultural issues is significant for the
operations in chipotle. This ensures that no group has an
advantage or disadvantage over the other therefore realizing the
full potential and achieving equitable work environment
(Bowen, 1978).
Chipotle has to embrace the culture in Chile so that it knows
types of food required failure it will cause the company to close
down in the process of trying to save itself. When Chipotle
moves to Chile, it should aim at having a workforce that cut
across different cultures, to avoid collapsing (Bowen, 1978).
This workforce should be quite dynamic and aid in bringing
different talents, interest, and viewpoints. The operations of the
company should be guided by having a holistic approach and
proper mechanisms of eliminating discrimination and injustice.
Chipotle should also ensure that it has a keen interest on its
stakeholders given the important role they play in the company.
The views of the stakeholders such as customers help in shaping
and defining culture and performance of the markets.
Foreign Direct Investments
As part of its entry mechanisms, Chipotle will need to
participate in foreign direct investment in its process of
production through different strategies. In that concern,
Chipotle has to expand its operations in Chile as part of its
foreign direct investments. Of which failure will lead to
collapsing of the restaurant in the new market. Foreign direct
investment will be disrupted by the currency, tax and company
laws within Chile if not taken into consideration (Bowen, 1978).
Chipotle will also be involved in foreign direct investments
through mergers and acquisitions, building new facilities,
operating intra-company loans and reinvesting the earned
profits from overseas or other countries. In bid to increase its
foreign direct investment, chipotle must expand its operation in
Chile. For instance, Chipotle has to build different restaurants
in Chile that would mainly deal with first moving food. After

14. this, it must ensure that there are schemes that will consider it
purposeful to expand and diversify.
Monetary system
The international monetary system is the legal framework of an
institution that the payment of international is made. This is
where the exchange rate and movement of capital are
determined. From Chile’s major newspaper, it has been
reported that Chile uses flexible exchange rate system. This
system was introduced when Chile was targeting to reduce the
rate of inflation. The flexible exchange rate is a monetary
system in which the markets forces and demand determine the
exchange rate. In this case, Chilean peso and US dollar
exchange is determined by the supply and demand between two
countries (Saunders, Cornett and McGraw, 2006).
Since the monetary system of Chile is flexible, Chipotle will
benefit from the system in the following ways. Firstly, it will
allow automatic adjustment of balance of payment. For
example, if there is a deficit in the balance of payment then it
will force the currency to depreciate by making imports more
expensive. Secondly, there is the absence of crises, Chipotle
will not be affected by the pressure mounting to devalue or
devalue hence, and the element of crises is eliminated.
Additionally, disequilibrium in the balance of payment is
rectified by internal prices and currency. Finally, chipotle
finance will be saved in Chile. This is because Chile is poor
compared to The USA. Therefore, in times of crisis chipotle can
borrow from its country because it keeps reserves (Saunders,
Cornett and McGraw, 2006).
However, there are also drawbacks of this system. They include,
the uncertainty this occurs because currency changes daily, in
which Chipotle may be unsure in the price of food in Chile.
Uncertainty will cause chipotle to doubt Chile’s economy hence
failing to invest in it. Chipotle will always operate on the basis
of speculation that in the long run causes losses (Saunders,
Cornett and McGraw, 2006). Finally, there is likelihood that
inflation will take place. The reason is, there is no proper

15. economic management. On the same note, the company will
suffer during that period (Saunders, Cornett and McGraw,
2006).
Balance of Payments
The balance of payment is records payment and receipt of
countries transactions. The balance of payment helps to provide
the information regarding the countries demand and supply
currency. The collected is used to evaluate the performance of
the business. The contents of the balance of payment are current
account, capital account and reserve account (Carr and Chen,
2002).
Sometimes if a country experiences balance of payment deficit
for my case Chile, central bank of Chile will increase the
interest rates to stabilise the balance of payment, Chipotle will
suffer in the process, because central government will target the
investors in the country with high profits hence taxing on them.
Chipotle will reduce the rate of investment in Chile because it
can earn the same profit elsewhere. Since Chipotle is an
international company, it will transfer cash back to its country.
At the same time, Chipotle could utilize the invoices that are
false to by paying imported items and under (Bowen, 1978).
On a positive note, if a Chile experiences unfavorable balance
of payment then it means it will rely on foreign direct
investment. Therefore, Chipotle will have an upper hand
because it would be among the major international companies
that will lead Chile in at higher interest. Another advantage is
that borrowing will increase the relationship between the Chile
government and chipotle. In the short term, the deficit will
increase Chile’s import which will boost people’s income. This
will enable consumers to flog in the Chipotle restaurant
(Saunders, Cornett and McGraw, 2006).
Foreign exchange market and risks
Foreign exchange market (FOREX) is and international market
that is decentralized, and it is used for trading currencies. It is
considered to be the largest market in the world the main
participants are international banks and other world trade

16. organization
Country risk refers to risks that arise from investing in a
country. They arise from changes in company environment that
may affect the assets and profit. The risks include exchange rate
risks, economic risks political risks and transfer risks. As
Chipotle is planning to invest in Chile, there is likelihood that it
may hit some obstacles. The obstacles always lead to a
reduction in return on investment (Carr and Chen, 2002). For
example financial risks, chipotle may find it hard to match the
dollar against the Chile currency. The mismatch may be due to
inflation and devaluation.
Next is a political market risk, chipotle need to analyze the
political environment of Chile before investing in it. The
political risk includes mass riots, civil war, and taxes. America
is considered to be a low-risk country, therefore; other
countries’ risks are compared with its risks. If Chipotle is
planning to invest in the long term, then it will face higher risks
in Chile because the investments are not made through the
regulated market (Carr and Chen, 2002).
Subsequently, commercial risk refers to losses that arise from
partners that are trading together. It arises from import and
export trade. It is, therefore, vital for America and Chile to be
fully committed and reliable to each other. They must also be
willing to pay the entire requirement. In this case, if America
doesn’t have proper knowledge about Chile market for the
Chipotle food. Then Chipotle food will fail in international
market. Adaptability of export plays a significant role in the
global market. If the Chipotle food doesn’t change according to
demand in foreign market requirement, it will cause commercial
risks (Carr and Chen, 2002).
Proactive: from its initial stages Chipotle has steadily grown
worldwide due to its proactive leaders. Some years back they
had a proper management, team. The leaders participated in
innovation strategies. The innovation led to new, different
type’s food that increased customer base. These led to mass
production of affordable food (Augustinus, et.al, 2001).

17. Conclusion
In summary, the paper has discussed the main strategies that
Chipotle a Multinational Corporation (MNC) can use to expand
its operation to the new markets and in the country of Chile.
Some of the strategies include market imperfections, foreign
exchange and risks of politics and the opportunity set for
expansion. There are some of emerging trends that disrupt
economic trends which in Currency US Dollar has played a key
role as the dominant global currency. This displaced the sterling
pound that appeared to be causing trade deficits
References
Bowen, D. L. (1978). International banking and finance. Lawyer
of the Americas, 510-529.
Augustinus, T. P., Stuber, W. D., Stuber, A. G., Greenbaum, J.
P., Mandal, S., Elliott, R. E., ... & Strasler, P. D. (2001).
International Banking and Finance.The International Lawyer,
287-320.
Carr, M., & Chen, M. A. (2002). Globalization and the informal
economy: how global trade and investment impact on the
working poor (pp. 92-2). Geneva: International Labour Office.
Saunders, A., Cornett, M. M., & McGraw, P. A.
(2006). Financial institutions management: A risk management

18. approach (Vol. 8). McGraw-Hill/Irwin.