International Pooch is headquartered in Canada, but is considering the construction of a plant in Japan. If they use the home currency approach to calculating the NPV, they will
1) Convert all yen cash flows into dollars;
2) Discount the cash flows at the firm's required return;
3) Compute the NPV in dollars.

Question

Quizplus · Accepted Answer

Using the home currency approach, a company converts all foreign currency cash flows into its home currency (in this case, yen into dollars), then discounts those cash flows at the firm's required rate of return to compute the NPV in the home currency, which aligns with the steps described.

International Pooch Is Headquartered in Canada, but Is Considering the Construction