When conducting a capital budgeting analysis and attempting to account for effects of exchange rate movements for a foreign project, inflation ____ included explicitly in the cash flow analysis, and debt payments by the subsidiary ____ included explicitly in the cash flow analysis.

Question

Quizplus · Accepted Answer

Inflation should be included explicitly in the cash flow analysis because it affects the value of the cash flows. Debt payments by the subsidiary should also be included explicitly in the cash flow analysis because they represent a cash outflow for the project.

When Conducting a Capital Budgeting Analysis and Attempting to Account