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:[LINE][LINE]1)
Convert all dollar cash ﬂows into yen;[LINE]2) Discount the cash ﬂows at the ﬁrm's required return
for Japanese denominated cash ﬂows;[LINE]3) Compute the NPV in yen.

Question

Quizplus · Accepted Answer

The home currency approach involves converting all cash flows into the home currency, which in this case would be Canadian dollars, and then discounting at the firm's required return for Canadian denominated cash flows. Therefore, this approach would not involve converting cash flows into yen and computing the NPV in yen.

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