Question
You are analyzing the cash flows for a proposed project overseas. It is estimated that annual cash flows will be $1million, but that only $300,000
You are analyzing the cash flows for a proposed project overseas. It is estimated that annual cash flows will be $1million, but that only $300,000 will be brought back to the U.S. each year with the remainder being reinvested back into the foreign market even though there are no restrictions on moving the entire amount back to the U.S. Which of the following is correct?
A) You should value the entire $1,000,000 each year
B) Value only the amount of cash flow not repatriated each year, the $700,000 reinvested.
C) You should value the entire $1,000,000, but use different discount rates for money repatriated and money reinvested
D) You should value only the $300,000 repatriated each year in your capital budgeting analysis.
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