1. When using capital budgeting techniques to evaluate a potential foreign project, a firm needs to recognize the specific political and economic risks (including foreign- exchange risk) arising from that foreign location. Compare the advantages of (1) using a higher discount rate and (ii) forecasting lower cash flows to evaluate such projects. Describe the financial function and how it fits in the MNE's organizational structure. 2. Typically, the cost of capital is lower in the global capital market than in domestic capital markets. Other things being equal, firms will likely prefer to finance their investments by borrowing from the global capital market. However, such borrowing may be restricted by host-country regulations or demands. Discuss the point at which firms should consider using the global equity markets to finance foreign investments and operations in lieu of the global debt markets. Are firms likely to encounter restrictions in the equity markets as well? What are the effects of such restrictions likely to be on a firm's investment and operating decisions? Show how companies can acquire outside funds for normal operations and expansion, including offshore debt and equity funds