If the Correlation of Returns Between Foreign Projects and Domestic

question 108

Multiple Choice

If the correlation of returns between foreign projects and domestic projects is less than 1.0,then:

• A) foreign projects should be discounted with a higher rate.
• B) the domestic firm would be better off without the foreign projects.
• C) the foreign project may not add much risk to the existing domestic operation.
• D) the foreign projects will experience a higher degree of inflation.

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Definitions:

Management Responsibilities

The duties and tasks associated with directing and controlling an organization or one of its units, including planning, organizing, leading, and controlling.

Invest

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Double Taxation

A situation where the same income is taxed twice, typically once at the corporate level and again at the personal level when distributed as dividends.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders, and has its own rights, privileges, and liabilities.