Which of the Following Statements Is FALSE

question 50

Multiple Choice

Which of the following statements is FALSE?

• A) If the foreign project is owned by a domestic corporation, managers and shareholders need to determine the home currency value of the foreign currency cash flows.
• B) The most obvious difference between a domestic project and a foreign project is that the foreign project will most likely generate cash flows in a foreign currency.
• C) The risk of the foreign project is unlikely to be exactly the same as the risk of domestic projects (or the firm as a whole), because the foreign project contains residual exchange rate risk that the domestic projects often do not contain.
• D) In an internationally integrated capital market, two equivalent methods are available for calculating the net present value (NPV) of a foreign project: Either we can calculate the net present value (NPV) in the foreign country and convert it to the local currency at the forward rate, or we can convert the cash flows of the foreign project into the local currency and then calculate the net present value (NPV) of these cash flows.

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