Chapter 1
Q. 1.ST.2
Explain why unfavorable economic or political conditions affect the MNC’s cash flows, required rate of return, and valuation.
Step-by-Step
Verified Solution
Weak economic conditions or unstable political conditions in a foreign country can reduce cash flows received by the MNC, or they can result in a higher required rate of return for the MNC. Either of these effects results in a lower valuation of the MNC.