When conducting a capital budgeting analysis and attempting to account for effects of exchange rate movements for a foreign project, inflation ____ included explicitly in the cash flow analysis, and debt payments by the subsidiary ____ included explicitly in the cash flow analysis.
A) should be; should be
B) should definitely not be; should definitely not be
C) should definitely not be; should be
D) should be; should definitely not be

Question

When conducting a capital budgeting analysis and attempting to account for effects of exchange rate movements for a foreign project, inflation ____ included explicitly in the cash flow analysis, and debt payments by the subsidiary ____ included explicitly in the cash flow analysis.​
A) ​should be; should be
B) ​should definitely not be; should definitely not be
C) ​should definitely not be; should be
D) ​should be; should definitely not be

Quizplus · Accepted Answer

Inflation should be included explicitly in the cash flow analysis as it affects the costs and revenues of the project. Debt payments by the subsidiary should also be included explicitly in the cash flow analysis as they have cash outflow implications for the parent company. Therefore, option A is the correct answer.

When Conducting a Capital Budgeting Analysis and Attempting to Account