In the Context of the Capital Budgeting Analysis of an MNC

question 61

Multiple Choice

In the context of the capital budgeting analysis of an MNC that has strong foreign competitors, "lost sales" refers to

• A)the cannibalization of existing projects by new projects.
• B)the entire sales revenue of a new foreign manufacturing facility representing the incremental sales revenue of the new project.
• C)both a and b
• D)none of the above

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Definitions:

Nominal Interest Rate

The interest rate actually paid for a loan, not adjusted for inflation.

Hyperinflation

A very high and typically accelerating rate of inflation, often exceeding 50% per month, leading to a rapid erosion of real value in the local currency.

Depression

A severe and prolonged downturn in economic activity, characterized by significant declines in GDP, high unemployment, and deflation.

Money Demand

The total amount of money that households and businesses want to hold at any given time, depending on interest rates, income levels, and economic activity.