Question

Which of the following is NOT a reason why capital budgeting for a foreign project is...

Which of the following is NOT a reason why capital budgeting for a foreign project is more complex than for a domestic project?

a. Parent firms must specifically recognize remittance of funds due to differing rules and regulations concerning remittance of cash flows, taxes, and local norms.

b. Different rates of inflation exist between the foreign and domestic economies.

c. Parent cash flows cannot be distinguished from project cash flows.

d. Changes in the exchange rate may affect the MNE’s profits and equity measured in the home currency.

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Answer #1

Ans ) d. Changes in exchange rate may affect the MNE's profits and equity measured in the home currency

Foreign project is more complex than domestic project becasue

Parent cash flow must be distinguished from project cash flow

Parent firm must specifically recognize remittance of funds due to differing rules and regulations concerning remittance of cash flows, taxes, and local norms

Inflation rates in different countries are different

Thus Changes in exchange rate is not one of the reason why capital budgeting for a foreign project is more complex than for a domestic project

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