Question
1.) What is the limitation of using point estimates of exchange rates in the capital budgeting analysis? List the various techniques for adjusting risk in
1.) What is the limitation of using point estimates of exchange rates in the capital budgeting analysis? List the various techniques for adjusting risk in multinational capital budgeting. Describe any advantages or disadvantages of each technique. Explain how simulation can be used in multinational capital budgeting. What can it do that other risk adjustment techniques cannot? Answer:
2.) Using the capital budgeting framework discussed in this chapter, explain the sources of uncertainty surrounding a proposed project in Hungary by a U.S. firm. In what ways is the estimated net present value of this project more uncertain than that of a similar project in a more developed European country?
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