Question: When using capital budgeting techniques to evaluate a potential foreign project, a firm needs to recognize the specific political and economic risks (including foreign-exchange risk

  1. When using capital budgeting techniques to evaluate a potential foreign project, a firm needs to recognize the specific political and economic risks (including foreign-exchange risk) arising from that foreign location. Compare the advantages of (i) using a higher discount rate and (ii) forecasting lower cash flows to evaluate such projects. Describe the financial function and how it fits in the MNEs organizational structure.

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