Asked by Adrian Badillo on May 23, 2024

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The cost of capital may be different for a foreign project than for an equivalent domestic project because foreign projects may be more or less risky.

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its investors and creditors.

Foreign Project

A business venture or investment located outside the investor's domestic country, often subject to additional risks such as currency fluctuations and political instability.

Domestic Project

A project undertaken within a country's borders, focusing on local development or business activities.

  • Scrutinize the economic risks tied to international trade activities, specifically those involving exchange rates and political instability.
  • Evaluate the risks and returns of international investments and their impact on the cost of capital.
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Daisy PrattsMay 26, 2024
Final Answer :
True
Explanation :
The cost of capital is determined by the level of risk associated with the project. Foreign projects may be subject to a variety of risks such as currency risk, political risk, and regulatory risk that may differ from domestic projects. Therefore, the cost of capital may be different for a foreign project than for an equivalent domestic project.