Which of the Following Statements Regarding International Projects Is FALSE

question 45

Multiple Choice

Which of the following statements regarding international projects is FALSE?

• A)Interest rates and costs of capital will likely be different in the foreign country as a result of the macroeconomic environment.
• B)The project will most likely generate foreign currency cash flows,and the firm cares only about the foreign currency value of the project.
• C)Under internationally integrated capital markets,the value of an investment does not depend on the currency we use in the analysis.
• D)The firm will probably face a different tax rate in the foreign country and will be subject to both foreign and domestic tax codes.

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Definitions:

Bandwagon Effect

Positive network externality in which a consumer wishes to possess a good in part because others do.

Network Externalities

Benefits or detriments to a product's value that result from the number of users the product has.

Negative Network Externalities

Adverse effects on a user of a product or service because the number of other users is too large or incompatible in some way.

Snob Effect

A phenomenon where the demand for a particular good increases as the price increases because the good is perceived as exclusive or high-status.