MNCs may be able to lock in a lower cost by financing in a low-interest-rate foreign currency if they have:
A) future cash inflows in that foreign currency.
B) future cash outflows in that foreign currency.
C) offsetting future cash inflows and outflows in that foreign currency.
D) no other cash flows in that foreign currency.
Answer Key

Question

Quizplus · Accepted Answer

MNCs can lock in a lower cost by financing in a low-interest-rate foreign currency if they have future cash inflows in that foreign currency. This is because they can use the foreign currency to repay the loan, which will save them money on interest payments.

MNCs May Be Able to Lock in a Lower Cost