which of the following risks is created by investing in foreign assets? course hero

Which cash flows should be included in evaluating a capital project?

May 12, 2016 · Selected Answer : foreign exchange risk Correct Answer : foreign exchange risk Selected Answer: foreign exchange risk Correct Answer: foreign exchange risk Question 8 0 out of 2 points If a government sells domestic currency in the forex market, the supply of the domestic currency should _______, and its exchange rate should _______.

What is the difference between beta risk and market risk?

Oct 10, 2014 · The element of risk into investing in foreign assets. 53. The element of risk into investing in foreign assets is more with _____ exchange rates. A. floating B. pegged C. fixed D. managed. A . floating.

What is the difference between stand alone risk and corporate risk?

Real estate prices fell across the board because the market was glutted with surplus pre-owned homes for sale. This is an example of _____. Select one: a. economic risk. b. industry risk. c. company risk. d. asset class risk. e. market risk. d. asset class risk.

What is the risk of expropriation?

The risk of expropriation (seizure) of a foreign subsidiary's assets by the host country or restrictions on cash flows to the parent company. The risk related to the foreign currency cash flows that will be turned over to the parent company and converted into U.S. dollars.

What is stand alone risk?

Stand-alone risk is a project's risk without factoring in the impact of diversification. Diversification can eliminate this type of risk. Corporate risk is the measure of the project's effect on the firm's risk or how much the firm's overall riskiness changes as a result of accepting the project.

How much was Eraser Corp in 2017?

In 2017, Eraser Corp had Revenue of $200 million, Cost of Goods Sold of $100 million (this includes Depreciation of $50 million), Sales General and Admin Expenses of $50 million, and faced a tax rate of 21%. Assume that no money was spent on Capital Expenditures or on additional Net Working Capital.

What is terminal cash flow?

A terminal cash flow is the cash flow that occurs at the end of the project's life. It includes the project's disposal value and related tax effects and the cost of returning the firm's operating assets to the state they were in without the project.#N#A sunk cost is a cost that has been incurred and may be related to a project but should not be part of the decision to accept or reject the project. A sunk cost is not relevant, because the cost has already been incurred, and acceptance of the project should be based on incremental future cash flows. This may be a difficult concept for management to understand.#N#Stand-alone risk is a project's risk without factoring in the impact of diversification. Diversification can eliminate this type of risk. Corporate risk is the measure of the project's effect on the firm's risk or how much the firm's overall riskiness changes as a result of accepting the project. Beta and market risk are the same thing. Beta risk is measured by the project's beta coefficient. It is assessed from the standpoint of a well-diversified stockholder.#N#Incremental cash flows are cash flows that the asset or project is expected to generate over its life. In evaluating a capital project, only the cash flows that result directly from the decision to accept the project should be included in the analysis. Estimating the incremental cash flows is one of the most important steps in capital budgeting.

What is repatriation of earnings?

Repatriation of earnings is the process of bringing foreign earnings from the country of origin into the firm's home country. When the foreign subsidiary sends cash to the parent, the earnings are converted from local currency to the currency of the parent. Some governments control the repatriation of earnings.

Is sunk cost a risk?

A sunk cost is not relevant, because the cost has already been incurred, and acceptance of the project should be based on incremental future cash flows. This may be a difficult concept for management to understand. Stand-alone risk is a project's risk without factoring in the impact of diversification.

Is beta risk the same as market risk?

Beta and market risk are the same thing. Beta risk is measured by the project's beta coefficient. It is assessed from the standpoint of a well-diversified stockholder. Incremental cash flows are cash flows that the asset or project is expected to generate over its life.