________ estimates future cash flows from the project in the functional currency of the parent firm.

Question

Quizplus · Accepted Answer

When estimating future cash flows from a project, the perspective of the parent firm is more relevant as it needs to assess the potential returns and risks of the investment. Therefore, the estimation should be done in the functional currency of the parent firm to reflect its economic reality. The project's perspective would focus on the cash flows generated within the project, which may not align with the parent's objectives. Passive and active hedging are strategies used to manage currency risk but are not directly related to estimating future cash flows.

________ Estimates Future Cash Flows from the Project in the Functional