A financial manager has determined that the appropriate discount rate for a foreign project is 16 percent However, that discount rate applies in the United States using dollars What discount rate should the manager use in the foreign country using the foreign currency The inflation rate in the Unit...

A financial manager has determined that the appropriate discount rate for a foreign project is 16 percent.

Question:

A financial manager has determined that the appropriate for a foreign project is 16 percent. However, that applies in the United States using dollars. What should the manager use in the foreign country using the foreign currency? The inflation rate in the United States and in the foreign country is expected to be 5 percent and 4 percent, respectively.
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...