In case of international capital budgeting, a U.S. company can minimize its political risk by creating a joint venture with a competent and well-connected local partner.

Question

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Creating a joint venture with a competent and well-connected local partner can provide a U.S. company with local knowledge and connections, which can help to minimize political risk when investing in a foreign country. The local partner can also provide a degree of protection against unfavorable government policies and regulations. Therefore, the statement is true.

In Case of International Capital Budgeting, a U