Many companies use economists’ forecasts of foreign exchange rates to translate cash flow projections denominated in foreign currency. What are the possible drawbacks of using such forecasts?
Answer to relevant QuestionsWhy do local market risk premiums differ across national stock markets? Do the differences mean that some markets are more attractive to invest in than others? Define contingent net present value (NPV). Outline and explain the differences between standard and contingent NPV. Consider the example of the valuation of the pharmaceutical R&D project described in the final section of the chapter. Under the assumptions stated, the DTA value is identical to the ROV value. Calculate what volatility (as ...Volatilities for individual stock and market indexes in emerging economies are typically higher than those for U.S. stocks and indexes. Should that mean that the cost of capital for investments in emerging economies is ...Why should a scenario approach to valuation be used to value cyclical companies?
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