1. Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.
   True
   False

2. Which of the following statements is CORRECT?

		A sunk cost is any cost that must be expended in order to complete a project and bring it into operation.
		A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.
		A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.
		Sunk costs were formerly hard to deal with, but once the NPV method came into wide use, it became possible to simply include sunk costs in the cash flows and then calculate the PV.
		A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm

Answer rating: 100% (QA)

1 True Exchange rate risk is the risk that the cash flows from an overseas project when converted to ... View the full answer