You Can Value Overseas Investments Using the NPV of the Cash

question 63

Multiple Choice

You can value overseas investments using the NPV of the cash flows.Which of the following adjustment is necessary to calculate the NPV?

• A) Convert the opportunity cost of capital and cash flows into foreign currency.
• B) Convert the foreign cash flows into domestic currency and use the domestic opportunity cost of capital for discounting.
• C) Use domestic discount rate to discount foreign cash flows.
• D) Convert the foreign cash flow into domestic currency and use the foreign cost of capital for discounting.

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Definitions:

Duress Rule

A legal principle that negates the validity of an agreement if it was made under coercion or threat of harm.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States.

Goods

Objects or materials that are produced for sale or exchange in the market, generally physical and tangible in nature.

Duress

A situation where a person performs an act as a result of violence, threat, or other pressure against them.