Question Details

Explain how the financing decision can influence the sensitivity 


1. Impact of Exchange Rates on NPV. Describe in general terms how future appreciation of the
euro will likely affect the value (from the parent- perspective) of a project established in
Germany today by a U.S.-based MNC. Will the sensitivity of the project value be affected by the
percentage of earnings remitted to the parent each year?
2. Impact of Financing on NPV. Explain how the financing decision can influence the sensitivity of
the net present value to exchange rate forecasts.



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