In international capital budgeting, the appropriate discount rate for determining the present value of the expected cash flows is always the firm's domestic WACC.

Question

Quizplus · Accepted Answer

The appropriate discount rate for determining the present value of the expected cash flows in international capital budgeting should be adjusted for the risks and uncertainties associated with the particular foreign investment. Therefore, the firm's domestic WACC may not be appropriate in all cases. The use of country-specific risk premiums or adjustments to the discount rate may be necessary to account for differences in risk between the domestic market and the foreign market.

In International Capital Budgeting, the Appropriate Discount Rate for Determining