Topic 2. MNC's investment decisions

One of the disadvantages of NPV is

• strong dependence on a discount rate

• not always correctly defined

• impossible to use complex cash flows

• impossible to use variable discount rate

One of the disadvantages of IRR is

• impossible to consider exchange rate risk

• strong dependence of a discount rate

• not always correctly defined

• impossible to consider country risk

One of the advantages of NPV is

• possibility to use variable discount rate

• possibility to use complex cash flows

• clear economic meaning

• all answers are correct

One of the advantages of IRR is

• possibility to use variable discount rate

• possibility to use complex cash flows

• always correctly defined

• doesn't depend on the choice of discount rate

How can you consider country risk in the multinational capital budgeting

• adjust discount rate

• adjust time horizon

• adjust cash flows

• all answers are correct

APV (adjusted present value) may be larger then NPV because of

• cannibalization effect

• extra sales effect

• inflation risk abroad

• country risk abroad

APV (adjusted present value) may be smaller then NPV because

• cannibalization effect

• extra sales effect

• using benefits of transfer pricing

• franchise fees of affiliate