The Home Currency Approach

question 74

Multiple Choice

The home currency approach:

• A)discounts all of a project's foreign cash flows using the current spot rate.
• B)employs uncovered interest parity to project future exchange rates.
• C)computes the net present value (NPV)of a project in the foreign currency and then converts that NPV into home currency.
• D)utilizes the international Fisher effect to compute the NPV of foreign cash flows in the foreign currency.
• E)utilizes the international Fisher effect to compute the relevant exchange rates needed to compute the NPV of foreign cash flows in home currency.

Analyze the relationship between consumer income changes and the demand for goods.

Understand the impact of expectations on supply behavior.

Identify the roles of transaction costs and how they affect market exchanges.

Recognize the conditions that lead to market disequilibrium and how markets adjust to changes.

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Definitions:

KFC Brand

A globally recognized fast-food franchise known for its fried chicken, originating in the United States and established by Colonel Harland Sanders.

Direct Investment

The action of an entity from one country investing to achieve dominant control over a corporation in another country.

Foreign Market

The markets outside the company's home country where it seeks to sell its products or services.

Greatest Commitment

The highest level of dedication or obligation one can have towards a cause, goal, or relationship.