When evaluating a foreign investment project,it is important for the MNC to consider the effect of political risk,as a sovereign country can change "the rules of the game." To account for this
A)the MNC may adjust the cost of capital upward.
B)the MNC may lower the expected cash flows from the foreign project.
C)the MNC may purchase insurance policies against the hazard of political risks.
D)all of the options

Question

Quizplus · Accepted Answer

When evaluating a foreign investment project, it is important for the MNC to consider the potential political risks. To account for this risk, the MNC may utilize a combination of options such as adjusting the cost of capital upward, lowering the expected cash flows from the foreign project, or purchasing insurance policies against the hazard of political risks. Therefore, all of the options are potential choices for an MNC to manage political risk.

When Evaluating a Foreign Investment Project,it Is Important for the MNC