Solved

To Use the Home Currency Approach to Analyze a Foreign

Question 185

Multiple Choice

To use the home currency approach to analyze a foreign project, you must:

A) Find the net present value of the project in the foreign currency and then convert the net present value into dollars using the current spot rate.
B) Convert all foreign cash flows into dollars using the current spot rate and then compute the net present value of the project.
C) Convert all foreign cash flows into dollars using estimated exchange rates for each time period and then compute the net present value of the project.
D) Find the net present value of the project in the foreign currency and then convert that value into dollars using the one-year forward rate.
E) Find the net present value of the project in the foreign currency and then convert that value into dollars using an average of the spot and the forward rates.

Correct Answer: