Developed country known as ldc encourages direct foreign inv

Assignment Help Macroeconomics

Reference no: EM1329542

Assume that a less developed country called LDC encourages direct foreign investment (DFI) in order to reduce its unemployment rate, currently at 15 percent. Also assume that several MNCs are likely to consider DFI in this country. The inflation rate in recent years has averaged 4 percent. The hourly wage in LDC for manufacturing work is the equivalent of about $5 per hour. When Piedmont Co. develops cash flow forecasts to perform a capital budgeting analysis for a project in LDC, it assumes a wage rate of $5 in Year 1 and applies a 4 percent increase for each of the next 10 years. The components produced are to be exported to Piedmont's headquarters in the United States, where they will be used in the production of computers. Do you think Piedmont will overestimate or underestimate the net present value of this project? Why?

Reference no: EM1329542

Questions Cloud

Laissez-faire leadership appropriate in which situation : Are there circumstances where laissez-faire leadership might be appropriate? (What are they?)

Determine major means of control : Global Supply Chain Management - Compare and contrast decision making at headquarters and at foreign subsidiary locations and determine major means of control

Industry trends and statistics : Locate a Standard and Poor's Industry Survey.

Developed country known as ldc encourages direct foreign : Suppose that a less developed country known as LDC encourages direct foreign investment

Developed country known as ldc encourages direct foreign inv : Suppose that a less developed country known as LDC encourages direct foreign investment

Substantive and procedural due process : Differentiate between substantive and procedural due process. In light of these differences and the protections of the Fifth and Sixth Amendments, should criminal defendants be allowed to be present during the grand jury's adjudication?

Leadership style of cluster emulated by american leaders : What parts of the leadership style of the cluster you selected do you believe should be emulated by American leaders?

Improve supply chain and quality : Recommendation for improving supply chain and quality - This meeting will be held on the discussion board and you are expected to bring recommendations that address the underlying issues of the various problems.

Discuss the win-win strategy : Discuss the win-win strategy in business. Give an example of one.

User Account

All Pages