A Foreign Project Generates a Negative Cash Flow in Year

question 35

Multiple Choice

A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5. The NPV for this project will be higher if the foreign currency ____ in year 1 and ____ in years 2 through 5.

• A) depreciates; depreciates
• B) appreciates; appreciates
• C) depreciates; appreciates
• D) appreciates; depreciates

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Definitions:

Seller

An individual or entity that offers goods or services for sale.

Cash Discount

An incentive for early payment, reducing the buyer's total amount owed.

Net

Net signifies the final amount remaining after all deductions have been made, such as expenses, taxes, or discounts, from a total or gross amount.

Discount Period

The time frame during which a discount is offered or can be claimed.