Which 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) All of these.

Question

Quizplus · Accepted Answer

Lower inflation in the foreign country would lead to a lower discount rate and a higher NPV in dollar terms. A higher risk-free rate or a less stable political environment would increase the discount rate, leading to a lower NPV in dollar terms.

Which of the Following Would You Expect to Improve the Dollar