Which one of the following would you expect to improve the dollar NPV of a foreign capital budgeting proposal?
A) The risk-free rate in the foreign country is higher than in the United States.
B) Lower inflation is expected in the foreign country than in the United States.
C) The foreign country has a less stable political environment.
D)An increase in domestic discount rate.

Question

Quizplus · Accepted Answer

Lower inflation in the foreign country would increase the purchasing power of the foreign currency, thereby improving the dollar NPV of the proposal. The other choices would have the opposite effect, reducing the dollar NPV.

Which One of the Following Would You Expect to Improve