Question If we are using foreign currency for the NPV decision, all we have to do is restate all the in terms of present value and use the current exchange rate. A. domestic incremental cash flow B. foreign incremental cash flow C. salvage value D. None of these

Question If we are using foreign currency for the NPV decision, all we have to do is restate all the in terms of present value and use the current exchange rate. A. domestic incremental cash flow B. foreign incremental cash flow C. salvage value D. None of these

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 2QA

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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

If we are using foreign currency for the NPV decision, all we have to do is restate all the in terms of present value and use the current exchange rate.

A. domestic incremental cash flow

B. foreign incremental cash flow

C. salvage value

D. None of these

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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