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4 The formula for foreign cost of capital is CoCFc RFFC - RFc + CoChc. Which of the following statement(s) regarding this formula is (are)
4 The formula for foreign cost of capital is CoCFc RFFC - RFc + CoChc. Which of the following statement(s) regarding this formula is (are) correct? Choose all correct answer(s) This formula states that foreign currency cost of capital can be approximated by the home currency risk premium for the project plus the difference between the risk-free rates in two countries. This formula states that foreign currency risk premium can be approximated by the home currency risk premium for the project. This formula applies when exchange rate movements are correlated with foreign currency cash flows and capital markets are internationally integrated and This formula does not apply when capital markets are internationally segmented. Reset Maximum marks: 4
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