Which of the Following Is Unique to Foreign Project Assessment

question 38

Multiple Choice

Which of the following is unique to foreign project assessment in the capital budgeting decision?

• A) Project cash flows must be determined.
• B) Parent cash flows and project cash flows are the same.
• C) Local tax issues affect the determination of free cash flows and the remittance of earnings.
• D) Inflation is not an issue, because companies use the same inflation rate in both the domestic and international setting in order to make the analysis more comparative.

---

Definitions:

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.

Recourse

In secured lending, if the asset collateralizing a loan proves not to have the value anticipated, recourse implies the borrower is still responsible for the debt. The lender is said to have recourse to the borrower.

Seasonal Working Capital

Additional working capital needed to support fluctuations in business activity due to seasonal changes in demand.

Short-Term Loans

Loans that are scheduled to be repaid in less than a year, often used for working capital or emergency financing needs.