A Financial Manager Has Determined That the Appropriate Discount Rate

question 94

Multiple Choice

A financial manager has determined that the appropriate discount rate for a foreign project is 15 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rates in the United States and in the foreign country are expected to be 5 percent and 7 percent, respectively.

• A) 13 percent
• B) 17 percent
• C) 18 percent
• D) 20 percent

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Definitions:

Due Care

The level of judgment, attention, and diligence reasonably expected of a person under certain circumstances.

Product Liability

Legal responsibility held by the manufacturer or seller of a product for injuries caused by defects or malfunctions of the product.

Negligence

The lack of due diligence that a reasonable person would demonstrate under comparable conditions, leading to injury or damage.

Manufacturer Prevail

This term is not standard, but it could refer to situations where a manufacturer's preferences or decisions override those of other parties in business contexts.