The foreign project's cash flows have to be converted to U. S. dollars, since the shareholders of the U. S. corporation (assuming they are mainly U. S. residents) are interested in dollar returns. This subjects them to exchange rate risk, and therefore requires an additional risk premium. There is also a risk premium for political risk (mainly the risk of expropriation). However, foreign investments also help diversify cash flows, so the net effect on the required rate of return is ambiguous.