Which One of the Following Statements Is Correct Concerning the Net

question 166

Multiple Choice

Which one of the following statements is correct concerning the net present value method of analyzing international capital budgeting projects?

• A) The easiest method of analysis is to use the home currency approach, which also provides the more reliable results as compared to the foreign currency approach.
• B) Both the home currency approach and the foreign currency approach will produce the same results but the foreign currency approach is easier to use.
• C) The foreign currency approach utilizes the uncovered interest parity relationship.
• D) The home currency approach utilizes the concept of the international Fisher effect.
• E) The net present value of a foreign project reflects the amount of funds in today's dollars that can be repatriated to the parent firm.

---

Definitions:

Normal Balance

The aspect of an account, be it on the debit or credit side, designated for recording increments to the account.

Credit

An accounting entry that increases a liability or equity account, or decreases an asset or expense account.

Adjusting Entry

An entry made in the accounts to reflect a correct amount of revenues and expenses for a specific period before preparing the financial statements.

Consulting Fees-Revenue

Income earned by an individual or a company for providing professional advice or services to clients.