Multinational Corporations (MNCs) in the United States, since the end of World War II, have spent hundreds of billions on Direct Foreign Investment (DFI) developing a sophisticated supply chain that smooths the transition to a global economy.  The Pandemic ruptured that supply chain, during the busiest time of the year in the United States.  We now have the situation in  Ukraine developing additional uncertainty.  Political risk and exchange rate risk have increased.  How would you adjust the required return for DFI?  Furthermore, should the attitude of an MNC towards DFI change?  Should Investment increase? (Sometimes additional risk creates good opportunities at reduced cost).

Should it remain unchanged?  Should it decrease?  (Perhaps repatriate some global operations and rebuild a domestic supply chain).  You are the Director of DFI and must answer these questions tomorrow before the Board?

Answer rating: 100% (QA)

As the Director of DFI the first step in adjusting the required return for DFI would be to assess the increased political and exchange rate risks asso... View the full answer