Assume that a firm is evaluating a potential foreign investment project. They believe there is substantial...
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Assume that a firm is evaluating a potential foreign investment project. They believe there is substantial risk of expropriation of the project's assets by the host country's government and that there would be no compensation (nor insurance payouts) in the event that their assets are taken. Therefore, because of this additional systematic risk to the firm's globally diversified investor base, they should increase the magnitude of the cost of capital (i.e. the discount rate) that they use to discount this foreign project's cash flows. Select one: O True O False Assume that a firm is evaluating a potential foreign investment project. They believe there is substantial risk of expropriation of the project's assets by the host country's government and that there would be no compensation (nor insurance payouts) in the event that their assets are taken. Therefore, because of this additional systematic risk to the firm's globally diversified investor base, they should increase the magnitude of the cost of capital (i.e. the discount rate) that they use to discount this foreign project's cash flows. Select one: O True O False
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Answer rating: 100% (QA)
False The higher the cost of capital the lower the present value of the cash flows from the ... View the full answer
Related Book For
Operations and Supply Chain Management
ISBN: 978-0078024023
14th edition
Authors: F. Robert Jacobs, Richard Chase
Posted Date:
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