7. Multinational capital budgeting Aa Aa E. The basic principles of capital budgeting are valid for both domestic and multinational capital budgeting analysis. However, it is important to recognize the unique risks that multinational firms face when they perform capital budgeting analysis in a foreign market. For instance, a U.S.-based multinational firm might conduct business in Brazil, but any profits made must be repatriated, or returned, to the parent company and converted to U.S. dollars There are significant risks inherent in these rather simple operations. In the table below, correctly identify whether each type of risk being described is an exchange-rate risk or a political risk. Exchange-R Political ate Risk Risk The risk of higher than expected taxes, tighter repatriation, or currency controls by the host country The uncertainty associated with the value of cash flows generated in one currency and then converted to another The risk of expropriation (seizure) of a foreign subsidiary's assets by the host country or restrictions on cash flows to the parent company Johnson Industries has considerable operations in Indonesia, producing component electronic parts. Johnson's Indonesian operation has been very successful, but the firm is now concerned about its host country preventing Johnson from repatriating a majority of the profits