Exchange rates for purposes of multinational capital budgeting:

Question

Quizplus · Accepted Answer

Exchange rates are very volatile and subject to various macroeconomic and geopolitical factors, which makes them very difficult to forecast accurately. Therefore, multinational capital budgeting decisions need to take into account the potential impact of exchange rate fluctuations on cash flows. Hedging with currency swaps can be an option to mitigate this risk, but it is not always easy or cost-effective. Finally, exchange rates do have an impact on the cash flows of multinational projects, both in terms of revenues and costs denominated in different currencies.

Exchange Rates for Purposes of Multinational Capital Budgeting