International Pooch is headquartered in Canada, but is considering the construction of a plant in
Japan. If they use the foreign currency approach to calculating the NPV, they will:[LINE][LINE]1)
Discount yen cash ﬂows at the required return on yen investments;[LINE]2) Compute the NPV in
yen;[LINE]3) Convert the yen NPV to a dollar NPV.

Question

Quizplus · Accepted Answer

The foreign currency approach involves discounting cash flows in the foreign currency at the required return on investments in that currency, computing the NPV in that currency, and then converting the NPV to the domestic currency. Therefore, the given statement is true.

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