Which One of the Following Is Advised When Evaluating a Capital

question 47

Multiple Choice

Which one of the following is advised when evaluating a capital project in a foreign country if you are concerned about political risk?

• A) The project should be abandoned until this risk disappears.
• B) The project's cost of capital rate should be decreased to offset the perceived risk.
• C) The domestic discount rate should be increased to account for the added risk.
• D) The project cash flows should be decreased to recognize the possibility of bad outcomes.

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Definitions:

Researching Potential

Refers to the process of exploring and evaluating the possibilities or prospects for future success or development in a certain area or venture.

Cofounders' Experience

The collective knowledge, skills, and expertise that founders of a company bring to the venture, influencing its strategy and chances of success.

Angel Investors

Wealthy individuals who provide capital to startups or entrepreneurs, often in exchange for equity stakes, at early stages of business development.

Young Startups

Newly established businesses, typically within the technology sector, that are in the early stages of their operations and are aiming for rapid growth.