When a Multinational Firm Calculates a Project for a Foreign

question 23

Multiple Choice

When a multinational firm calculates a project for a foreign subsidiary with ________ net value,then the project should probably be ________.

• A) Zero, delayed
• B) Positive, sold
• C) Negative, accepted
• D) Positive, accepted

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Definitions:

Net Present Value

A calculation that evaluates an investment's profitability by discounting expected future cash flows to their present value and subtracting the initial investment.

Cash Inflows

Funds received by a business from its operational activities, investments, or financing, contributing to its cash pool.

Time Value of Money

The belief that possessing money in the present is worth more than holding the same amount later on because it has the potential to increase in value.

Capital Budgeting Methods

Techniques used by companies to evaluate the desirability of investments or expenditures. Major methods include net present value (NPV), internal rate of return (IRR), and payback period.