Companies involved in international capital budgeting projects can minimize the long-term currency risk by financing the foreign investment at least partly in the local capital markets.

Question

Quizplus · Accepted Answer

By financing the foreign investment at least partly in the local capital markets, companies can minimize the long-term currency risk as they can match the cash inflows from the investment with the local currency outflows used to service the debt. This strategy can help them avoid the volatility and uncertainty of exchange rate fluctuations.

Companies Involved in International Capital Budgeting Projects Can Minimize the Long-Term