To Use the Home Currency Approach to Analyze a Foreign

question 329

Multiple Choice

To use the home currency approach to analyze a foreign project, you must:

• A) Find the net present value of the project in the foreign currency and then convert the net present value into dollars using the current spot rate.
• B) Convert all foreign cash flows into dollars using the current spot rate and then compute the net present value of the project.
• C) Convert all foreign cash flows into dollars using estimated exchange rates for each time period and then compute the net present value of the project.
• D) Find the net present value of the project in the foreign currency and then convert that value into dollars using the one-year forward rate.
• E) Find the net present value of the project in the foreign currency and then convert that value into dollars using an average of the spot and the forward rates.

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Definitions:

Synergist

A muscle that assists another muscle in accomplishing a movement by helping reduce undesired motion or by stabilizing joints.

Prime Mover

A prime mover, in anatomy and physiology, refers to the muscle that plays a leading role in performing a particular movement by contracting, while other muscles may play supportive or stabilizing roles.

Fixator

A muscle or muscle group that stabilizes the origin of another muscle to enable effective action of the muscle.

Antagonist

A substance that binds to a receptor and blocks or dampens a biological response by inhibiting the effect of an agonist.