There are various components that could affect capital budgeting in a company.docx

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There are various components that could affect capital budgeting in a company. According to the text, the basic techniques of multinational companies (MNCs) are the same as solely domestic firms, but those firms who operate in other countries have risks that are unique to the international ground. Specifically, components such as exchange rate risk, political risk, tax law differences, transfer pricing and a strategic rather than a strict financial viewpoint play major roles in determining capital budgeting. First off, exchange rate risk shows the hazard of an unforeseen alteration in the exchange rate among the dollar and the currency of an assignment’s cash flows are denominated will decrease the market value of that assignment’s cash flow. If the present currency depreciates, then the future cash inflows can be intensely altered. In order to minimize a long-term exchange rate risk is by financing the assignment with in whole or partially using local currency.

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