How do international factors affect decision making? Although the same basic principles of capital budgeting apply to both foreign and domestic operations, there are some key differences. For example, cash flows must be converted into the parent company's currency, so they are subject to exchange rate risk. In addition, the cost of capital may be different for a foreign project compared with an equivalent domestic project. For this Assignment, complete Problem 18-17, Parts a, b, and c on page 659 of your course text. This case examines the effects of exchange rates on net present values and rates of return.