The Required Rate of Return Used to Discount the Relevant

question 62

True/False

The required rate of return used to discount the relevant cash flows from a foreign project may differ from the MNC's cost of capital because of that particular project's risk.

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Definitions:

Ratio of Prices

The comparative value of two or more goods or services, expressed as a quotient showing the cost relationship.

Fixed Income

A type of investment in which real return rates or periodic income is received at regular intervals and at reasonably predictable levels.

Slope of Budget Line

The rate at which one good can be exchanged for another without changing the overall spending, reflecting trade-offs in consumer choice.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with higher elasticity indicating a stronger response.