An increase in uncertainty regarding the price at which a firm can sell the output from a foreign investment project leads to an increase in the value of the investment, all else constant.

Question

Quizplus · Accepted Answer

An increase in uncertainty regarding the price at which a firm can sell the output from a foreign investment project leads to an increase in the risk of the project. As a result, the firm will require a higher expected return on the project to compensate for the increased risk. This higher expected return will lead to a higher value for the investment.

An Increase in Uncertainty Regarding the Price at Which a Firm