If managers intend to adjust the projections of foreign investments, it is probably better to make the adjustments in:
A)The discount rate used
B)The cash flows projected
C)Both the discount rate and cash flows
D)Exchange rate, but never in the discount rate

Question

Quizplus · Accepted Answer

Cash flows projected are the best choice to adjust the projections of foreign investments. The discount rate is a constant factor that reflects the risk involved in the investment, whereas cash flows are the variable factors that are subject to changes due to various factors such as economic conditions, competition, and market trends. Adjusting the cash flows projected allows for a more accurate reflection of the potential return on investment for the foreign investment, whereas adjusting the discount rate may lead to incorrect evaluations of risk and return.

If Managers Intend to Adjust the Projections of Foreign Investments