Capital budgeting for domestic and foreign operations

Assignment Help Financial Management

Reference no: EM132021318

1. One of the differences between capital budgeting for domestic and foreign operations is that the:

a. cash flow estimation is simple for foreign operations.

b. cash flows for foreign operations are subject to future exchange rate changes.

c. foreign operations are free from taxes imposed by home-country and host-country.

d. repatriation of earnings does not occur for foreign operations.

e. foreign operations are always less riskier than domestic operations.

2. If the firm is being operated so as to maximize shareholder wealth, and if our basic assumptions concerning the relationship between risk and return are true, then which of the following should be true??

a. If the beta of the asset is greater than the corporate beta prior to the addition of that asset, then the corporate beta after the purchase of the asset will be smaller than the original corporate beta.?

b. If the beta of an asset is larger than the firm's beta, then the required rate of return is equal to the beta.

c. If the beta of the asset is smaller than the firm's beta, then the required return on the asset is greater than the required return on the firm.

d. If the beta of the asset is larger than the firm's beta, then the required return on the asset is less than the required return on the firm.

e. If the beta of an asset is larger than the corporate beta prior to the addition of that asset, then the required return on the firm will be greater after the purchase of that asset than prior to its purchase.

Reference no: EM132021318

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