When evaluating a capital expenditure to be made in a foreign country, the parent firm must be concerned with the
A) exchange rate risk
B) cash flows that can be expected to be received by the parent
C) greater uncertainty associated with tax rates in the host country
D) all the above

Question

Quizplus · Accepted Answer

Evaluating a capital expenditure in a foreign country requires considering all of the above factors - exchange rate risk, cash flows expected to be received by the parent company, and uncertainty surrounding tax rates in the host country. The parent company needs to analyze the potential impact of exchange rate movements on their investment, estimate the expected cash flows from the investment, and assess the tax implications of the investment in the host country. Only by considering all of these factors can the parent company make an informed decision about whether to proceed with the investment.

When Evaluating a Capital Expenditure to Be Made in a Foreign