Multinational firms should invest only if they can earn a risk-adjusted return greater than locally based competitors can earn on the same project.

Question

Quizplus · Accepted Answer

This is because multinational firms typically face additional risks and costs related to operating in multiple countries, such as political and currency risks, as well as expenses associated with managing a global supply chain. Therefore, they need to earn a higher return to offset these additional costs and risks and justify their investment. If they cannot earn a risk-adjusted return greater than what local competitors can earn, it may not make financial sense for them to invest in the project.

Multinational Firms Should Invest Only If They Can Earn a Risk-Adjusted