Investment Analysis
Exam Bank
Course Introduction
Investment Analysis explores the fundamental principles and analytical tools necessary for evaluating investment opportunities in financial markets. The course covers topics such as risk and return assessment, portfolio theory, asset pricing models, and valuation of financial securities including stocks, bonds, and derivatives. Students learn to apply quantitative and qualitative methods to forecast financial performance, assess market trends, and make informed investment decisions. Emphasis is placed on practical application through case studies, real-world data analysis, and portfolio management strategies, equipping students with skills essential for careers in finance, asset management, and investment banking.
Recommended Textbook Fundamentals of Corporate Finance Global 3rd Edition by Jonathan Berk
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Page 2
Chapter 1: The Corporation
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Q1) You overhear your manager saying that she plans to book an Ocean-view room on her upcoming trip to Miami for a meeting. You know that the interior rooms are much less expensive, but that your manager is traveling at the Company's expense. This use of additional funds comes about as a result of:
A)an agency problem.
B)an adverse selection problem.
C)a moral hazard.
D)a publicity problem.
Answer: A
Q2) A sole proprietorship is owned by:
A)one person.
B)two of more persons.
C)shareholders.
D)bankers.
Answer: A
Q3) Explain the difference between a sub-chapter "S" corporation and a sub-chapter "C" corporation in the U.S..
Answer: 11ea7ff7_a58f_b68f_846e_3d4034b09507_TB2790_00
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3
Chapter 2: Introduction to Financial Statement Analysis
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Q1) Which of the following statements regarding the income statement is INCORRECT?
A)The income statement shows the earnings and expenses at a given point in time.
B)The income statement shows the flow of earnings and expenses generated by the firm between two dates.
C)The last or "bottom" line of the income statement shows the firm's net income (or net profit).
D)The first line of an income statement lists the revenues from the sales of products or services.
Answer: A
Q2) Gross profit is calculated as:
A)Total sales - cost of sales - selling, general and administrative expensesdepreciation and amortization
B)Total sales - cost of sales - selling, general and administrative expenses
C)Total sales - cost of sales
D)None of the above
Answer: C
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Chapter 3: Financial Decision Making and the Law of One
Price
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Q1) You have an investment opportunity in the United Kingdom that requires an investment of $500,000 today and will produce a cash flow of £320,000 in one year with no risk. Suppose the risk-free rate of interest in the U.K is 6% and the current competitive exchange rate is $1.70/£. What is the NPV of this project? Would you take the project?
Answer: NPV = -500,000 + (£320,000/1.06)× $1.70/£ = $13,208 so since NPV > 0, accept
Q2) If the risk-free interest rate is 10%, then of the four projects listed, if you could only invest in one project, which on e would you select?
A)Eenie
B)Meenie
C)Mighty
D)Moe
Answer: A
Q3) The price per share of the ETF in a normal market is: Answer: Value of ETF = 2 × 121.57 + 3 × 36.59 + 3 × 3.15 = $362.36
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Page 5
Chapter 4: The Time Value of Money
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Q1) You are looking for a new truck and see the following advertisement. "Own a new truck! No money down. Just five easy annual payments of $8000." You know that you can get the same truck from the dealer across town for only $31,120. The interest rate for the deal advertised is closest to:
A)9%
B)8%
C)8.5%
D)10%
Q2) Which of the following is NOT a valid time value of money function in Excel?
A)PMT
B)NPER
C)I
D)FV
Q3) If the current rate of interest is 8% APR, then the future value of an investment that pays $500 every two years and lasts 20 years is closest to:
A)$10,979
B)$10,661
C)$22,881
D)$20,000
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Page 6
Chapter 5: Interest Rates
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Q1) Which alternative offers you the lowest effective rate of return?
A)Investment A
B)Investment B
C)Investment C
D)Investment D
Q2) The amount of your original loan is closest to:
A)$14,808
B)$22,212
C)$32,000
D)$37,020
Q3) A tax free municipal bond pays an effective annual rate of 7.2%. If your tax rate is 30%, then the effective annual rate that a comparable corporate bond would have to offer you an equivalent after tax return would be closest to:
A)5.0%
B)7.2%
C)9.4%
D)10.3%
Q4) What is the effective after-tax rate of each instrument, expressed as an EAR?
Q5) Should you purchase the delivery truck or lease it? Why?
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Chapter 6: Valuing Bonds
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Q1) Plot the zero-coupon yield curve (for the first five years).
Q2) The amount that the price of bond "D" will change if its yield to maturity increases from 8% to 9% is closest to:
A)-$36
B)-$39
C)$36
D)$9
Q3) Which of the four bonds is the most sensitive to a one percent increase in the YTM?
A)Bond A
B)Bond B
C)Bond C
D)Bond D
Q4) The yield to maturity for the three year zero-coupon bond is closest to:
A)5.4%
B)5.8%
C)5.6%
D)6.0%
Q5) Assuming that this bond trades for $1,035.44, then the YTM for this bond is equal to:
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Chapter 7: Investment Decision Rules
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Q1) The IRR for Larry's three movie deal offer is closest to:
A)3.5%
B)1.6%
C)-3.5%
D)-1.6%
Q2) The internal rate of return rule can result in the wrong decision if the projects being compared have:
A)differences in scale.
B)differences in timing.
C)differences in NPV.
D)A and B are correct.
Q3) Assuming that the discount rate for project A is 16% and the discount rate for B is 15%, then given that these are mutually exclusive projects, which project would you take and why?
Q4) Assuming that Dewey's cost of capital is 12% EAR, then the IRR of his retainer offer is closest to:
A)-39.3%
B)-3.3%
C)20.0%
D)39.3%
9
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Chapter 8: Fundamentals of Capital Budgeting
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Q1) What is an opportunity cost? Should it be included in the incremental cash flows for a project? Why or why not?
Q2) Ignoring the original investment of $5 million, what is THSI's free cash flow for the first and only year of operation?
A)$5.0 million
B)$3.75 million
C)$8.0 million
D)$6.25 million
Q3) Epiphany is worried about the reliability of the sales forecast. How sensitive is the project's NPV to a 10% change in sales.
Q4) The incremental cash flow that the Krusty Krab will incur in year 1 if they elect to upgrade to the new grill is closest to:
A)6,500
B)7,800
C)10,800
D)11,500
Q5) How does scenario analysis differ from sensitivity analysis?
Q6) What is the NPV of the Epiphany's project?
Q7) What is sensitivity analysis?
Page 10
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Chapter 9: Valuing Stocks
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Q1) What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?
Q2) Which of the following statements is FALSE?
A)Even two firms in the same industry selling the same types of products, while similar in many respects, are likely to be of different size or scale.
B)In the method of comparables we estimate the value of the firm based on the value of other, comparable firms or investments that we expect will generate very similar cash flows in the future.
C)Consider the case of a new firm that is identical to an existing publicly traded company. If these firms will generate identical cash flows, the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
D)A valuation multiple is a ratio of some measure of the firm's scale to the value of the firm.
Q3) What are the implications of the efficient market hypothesis for corporate managers?
Q4) What do you anticipate will happen to Lockheed-Martin and Boeing's stock prices are a result of this surprise announcement?
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Page 11
Chapter 10: Capital Markets and the Pricing of Risk
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Q1) Which of the following statements is FALSE?
A)We measure the degree of estimation error statistically through the standard error of the estimate.
B)When focusing on the returns of a single security, its common practice to assume that all dividends are immediately invested at the risk-free rate.
C)We estimate the standard deviation or volatility as the square root of the variance.
D)We estimate the variance by computing the average squared deviation from the average realized return.
Q2) Which of the following is NOT a systematic risk?
A)The risk that oil prices rise, increasing production costs
B)The risk that the Federal Reserve raises interest rates
C)The risk that the economy slows, reducing demand for your firm's products
D)The risk that your new product will not receive regulatory approval
Q3) Suppose that you want to use the 10 year historical average return on Stock B to forecast the expected future return on Stock B. Calculate the 95% confidence interval for your estimate of the expect return.
Q4) What is the market portfolio?
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12
Chapter 11: Optimal Portfolio Choice and the Capital Asset Pricing Model
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Q1) Consider a portfolio consisting of only Duke Energy and Microsoft. The percentage of your investment (portfolio weight)that you would place in Duke Energy stock to achieve a risk-free investment would be closest to:
A)15%
B)40%
C)23%
D)10%
Q2) Which of the following equations is INCORRECT?
A)E[R<sub>xCML</sub>] = r<sub>f</sub> + x(E[R<sub>Mkt</sub>] + r<sub>f</sub>)
B)r<sub>i</sub> = r<sub>f</sub> + b(E[R<sub>Mkt</sub>] - r<sub>f</sub>)
C)SD(R<sub>xCML</sub>)= xSD(R<sub>Mkt</sub>)
D)E[R<sub>xCML</sub>] = (1 - x)r<sub>f</sub> + xE[R<sub>Mkt</sub>]
Q3) The Sharpe ratio for the market (which is a 50-50 combination of the value and growth portfolios)portfolio is closest to:
A).53
B).58
C).61
D).79
Q4) Will adding the precious metals fund improve your portfolio?
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Chapter 12: Estimating the Cost of Capital
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Q1) The value of the oil exploration division is closest to:
A)$4,500
B)$7,500
C)$8,750
D)$10,000
Q2) The equity cost of capital for "Meenie" is closest to:
A)4.50%
B)7.50%
C)9.30%
D)9.75%
Q3) Which of the following is NOT considered a difficulty with regards to the CAPM?
A)Betas are not observed.
B)Expected returns are not observed.
C)The market proxy is not correct.
D)Investors risk preferences are not observed.
Q4) Which firm has the highest cost of equity capital?
A)Eenie
B)Meenie
C)Miney
D)Moe
Page 14
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Chapter 13: Investor Behavior and Capital Market Efficiency
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Q1) Which of the following is NOT true regarding individual investor behavior?
A)Individual investors fail to diversify their portfolios adequately.
B)A vast majority of individual investors hold fewer than 10 stocks in their portfolio.
C)Employees tend to overinvest in their company's own stock.
D)Individual investors' portfolios consistently outperform the market averages.
Q2) If investors have relative wealth concerns, they care most about:
A)the return on their portfolio relative to their overall current wealth.
B)the performance of their portfolio relative to that of their peers.
C)their current portfolio performance relative to their past portfolio performance.
D)the performance of their current wealth relative to their past wealth.
Q3) The tendency to hang on to losers and sell winners is known as the:
A)cascade effect.
B)disposition effect.
C)overconfidence bias.
D)systematic behavior bias.
Q4) What does the existence of a positive alpha investment strategy imply?
Q5) Explain why the market portfolio proxy may not be efficient.
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Page 15
Chapter 14: Capital Structure in a Perfect Market
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Q1) Prior to any borrowing and share repurchase, RC's EPS is closest to:
A)$0.60
B)$1.00
C)$1.20
D)$0.50
Q2) Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation, the cost of capital for the firm's levered equity is closest to:
A)23%
B)25%
C)15%
D)18%
Q3) Galt's enterprise value is closest to:
A)$90 million
B)$510 million
C)$600 million
D)$690 million
Q4) Based upon the three comparable firms, what asset beta would you recommend using for your firm's new project?
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Chapter 15: Debt and Taxes
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Q1) Which of the following statements is FALSE?
A)The higher the firm's leverage, the more the firm exploits the tax advantage of debt, and the lower its WACC.
B)Corporate taxes lower the effective cost of debt financing, which translates into a reduction in the weighted average cost of capital.
C)Because the firm's free cash flow is computed without considering the firm's leverage, we account for the benefit of the interest tax shield by calculating the WACC using the before tax cost of debt.
D)The reduction in the WACC increases with the amount of debt financing.
Q2) Assume that investors in Google pay a 15% tax rate on income from equity and a 35% tax rate on interest income. If Google were to issue sufficient debt to reduce its corporate taxes by $1 billion per year permanently, then the value that would be created is closest to:
A)$6.4 billion
B)$8.6 billion
C)$9.8 billion
D)$14.3 billion
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Page 17
Chapter 16: Financial Distress, Managerial Incentives, and Information
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Q1) Which of the following is NOT a direct cost of bankruptcy?
A)Costs to creditors
B)Investment banking costs
C)Costs of accounting experts
D)Legal costs and fees
Q2) Which of the following statements is FALSE?
A)The direct costs of bankruptcy are likely to be higher for firms with more complicated business operations and for firms with larger numbers of creditors, because it may be more difficult to reach agreement among many creditors regarding the final disposition of the firm's assets.
B)In a prepackaged bankruptcy (or "prepack")a firm will first develop a reorganization plan with the agreement of its main creditors, and then file Chapter 7 to implement the plan and pressure any creditors who attempt to hold out for better terms.
C)A study of Chapter 7 liquidations of small businesses found that the average direct costs of bankruptcy were 12% of the value of the firm's assets.
D)Studies typically report that the average direct costs of bankruptcy are approximately 3% to 4% of the pre-bankruptcy market value of total assets.
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Page 18
Chapter 17: Payout Policy
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Q1) The effective tax disadvantage for retaining cash in 2002 is closest to:
A)15.00%
B)14.75%
C)30.00%
D)35.00%
Q2) Which of the following statements is FALSE?
A)Firms adjust dividends relatively infrequently, and dividends are much less volatile than earnings. This practice of maintaining relatively constant dividends is called dividend signaling.
B)When a firm increases its dividend, it sends a positive signal to investors that management expects to be able to afford the higher dividend for the foreseeable future.
C)The average size of the stock price reaction increases with the magnitude of the dividend change, and is larger for dividend cuts.
D)When managers cut the dividend, it may signal that they have given up hope that earnings will rebound in the near term and so need to reduce the dividend to save cash.
Q3) Calculate the effective tax disadvantage for retaining cash in 1999, 2001, and 2005.
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Chapter 18: Capital Budgeting and Valuation With Leverage
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Q1) The Debt Capacity for Omicron's new project in year 2 is closest to:
A)$55.25
B)$38.75
C)$22.00
D)$33.00
Q2) Which of the following statements is FALSE?
A)The APV approach explicitly values the market imperfections and therefore allows managers to measure their contribution to value.
B)We need to know the debt level to compute the APV, but with a constant debt-equity ratio we need to know the project's value to compute the debt level.
C)The WACC method is more complicated than the APV method because we must compute two separate valuations: the unlevered project and the interest tax shield.
D)Implementing the APV approach with a constant debt-equity ratio requires solving for the project's debt and value simultaneously.
Q3) Given that Rose issues new debt of $50 million initially to fund the acquisition, the total value of this acquisition using the APV method is equal to?
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Chapter 19: Valuation and Financial Modeling: a Case Study
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Q1) The amount of net working capital for Ideko in 2008 is closest to:
A)$35,195
B)$26,420
C)$22,170
D)$30,510
Q2) What range for the market value of equity for Ideko is implied by the range of P/E multiples for the comparable firms?
Q3) Based upon Ideko's Sales and Operating Cost Assumptions, what production capacity will Ideko require in 2008?
A)1,702 units
B)1,323 units
C)1,505 units
D)1,914 units
Q4) If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%, then the cost of capital for Luxottica is closest to:
A)10.2%
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Chapter 20: Financial Options
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Q1) The payoff to the holder of a put option is given by:
A)P = max(K - S, 0)
B)P= max(S - K, 0)
C)P = min(S - K, 0)
D)P = max(K, 0)
Q2) The maximum value of a one-year American call option on Rearden Metal with a strike price of $60 per share is closest to:
A)$0
B)$1.84
C)$2.48
D)$2.86
Q3) Using options to place a bet on the direction in which you believe the market is likely to move is called:
A)speculation.
B)hedging.
C)a covered position.
D)a naked position.
Q4) Describe the conditions when it would be optimal to exercise an American Call and an American Put option prior to their expiration.
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Chapter 21: Option Valuation
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Q1) Which of the following is NOT an input required by the Black-Scholes option pricing model?
A)The expected volatility of the stock
B)The expected return on the stock
C)The risk-free interest rate
D)The current stock price
Q2) Which of the following statements is FALSE?
A)The techniques of the binomial option pricing model are specific to European call and put options.
B)We can summarize the payoffs for the Binomial Option Pricing Model in a binomial tree-a timeline with two branches at every date that represent the possible events that could happen at those times.
C)We define the state in which the stock price goes up as the up state and the state in which the stock price goes down as the down state.
D)When using the Binomial Option Pricing Model, by the Law of One Price, the price of the option today must equal the current market value of the replicating portfolio.
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Chapter 22: Real Options
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Q1) Assuming that this project will provide Rearden with perpetual annual cash flows of $80,000, Rearden should:
A)invest today since the NPV is positive.
B)invest today since the NPV is negative.
C)invest today since the NPV using the hurdle rate is positive.
D)delay investing since the NPV using the hurdle rate is negative.
E)delay investing since the NPV using the hurdle rate is positive.
Q2) Luther Industries is considering launching a new toy just in time for the Christmas season. They estimate that if Luther launches the new toy this year it will have an NPV of $25 million. Luther has the option to wait one year until the next Christmas season to launch the toy, however, the demand next year will depend upon what new toys Luther's competitors introduce and therefore greater uncertainty about next years demand. Launching the new today will involve a total capital expenditure of $100 million. If the risk-free rate is 5%, N(d<sub>1</sub>)is .62 and N(d<sub>2</sub>)is .65, then what is the value of the option to wait until next year to launch the new toy?
Q3) Assume that you are not able to sell the plant, but you are able to shut down the plant at no cost at any time. Draw a decision tree detailing this problem.
Q4) Can value be created by waiting for uncertainty to resolve?
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Chapter 23: Raising Equity Capital
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Q1) Which of the following statements is FALSE?
A)SEO rights offers have lower costs than cash offers.
B)The decision to raise financing externally usually implies that a firm plans to pursue an investment opportunity.
C)Although not as costly as IPOs, seasoned offerings are still expensive.
D)Researchers have found that, on average, the market greets the news of an SEO with a price increase.
Q2) Which of the following statements regarding firm commitment IPOs is FALSE?
A)If the entire issue does not sell out, the remaining shares must be sold at a lower price and the underwriter must take the loss.
B)The underwriter purchases the entire issue (at a the offer price)and then resells it at a slightly higher price to interested investors.
C)It is the most common underwriting arrangement.
D)The underwriter guarantees that it will sell all of the stock at the offer price.
Q3) Based upon the price/earnings ratio, what would be a reasonable value for KD?
Q4) Describe the four characteristics of IPOs that puzzle financial economists.
Q5) How much money did Luther raise?
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Page 25
Chapter 24: Debt Financing
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Q1) Which of the following statements is FALSE?
A)The holder of a callable bond faces reinvestment risk precisely when it hurts: when market rates are lower than the coupon rate she is currently receiving.
B)When yields have risen, the issuer will not choose to exercise the call on the callable bond.
C)The issuer will exercise the call option only when the prevailing market rate exceeds the coupon rate of the bond.
D)A callable bond is relatively less attractive to the bondholder than the identical non-callable bond.
Q2) What is the Yield to Call (YTC)on this bond?
Q3) Which of the following does NOT issue asset-backed securities?
A)Government National Mortgage Association
B)Federal National Mortgage Association
C)Student Loan Marketing Association
D)Federal Reserve
Q4) What is the Yield to Maturity (YTM)on this bond?
Q5) What is the Yield to Call (YTC)on this bond?
Q6) What is the Yield to Maturity (YTM)on this bond?
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Chapter 25: Leasing
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Q1) Assuming that Rearden's annual lease payments are $1.2 million, then the effective after-tax lease borrowing rate is closest to:
A)7.2%
B)8.0%
C)8.8%
D)9.1%
Q2) Which of the following statements is FALSE?
A)In a direct lease, the lessor is the manufacturer (or a primary dealer)of the asset.
B)The lease specifies any cancellation provisions, the options for renewal and purchase, and the obligations for maintenance and related servicing costs.
C)If a firm already owns an asset it would prefer to lease, it can arrange a sale and leaseback transaction.
D)With many leases, the lessor provides the initial capital necessary to purchase the asset, and then receives and retains the lease payments.
Q3) Calculate the monthly lease payments for a four year fixed price lease that allows the lessee to buy the Bulldozer at the end of the lease for $8,000.
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Chapter 26: Working Capital Management
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Q1) Which of the following statements is FALSE?
A)The lower the discount percentage offered, the greater the cost of forgoing the discount and using trade credit.
B)A firm should choose to borrow using accounts payable only if trade credit is the cheapest source of funding.
C)A firm should always pay on the latest day allowed.
D)A firm should strive to keep its money working for it as long as possible without developing a bad relationship with its suppliers or engaging in unethical practices.
Q2) Which of the following money market investments is a short-term, unsecured debt obligation issued by a large corporation. The minimum denomination is $25,000, but most have a face value of $100,000 or more?
A)Banker's Acceptance
B)Commercial Paper
C)Repurchase Agreement
D)Certificates of Deposit (CD)
E)Treasury Bill
Q3) Calculate the number of days in Luther's Operating Cycle.
Q4) Describe "just-in-time" inventory management.
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Page 28
Chapter 27: Short-Term Financial Planning
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Q1) A a written, legally binding agreement that obligates the bank to lend a firm any amount up to a stated maximum, regardless of the financial condition of the firm (unless the firm is bankrupt)as long as the firm satisfies any restrictions in the agreement is called:
A)a bridge loan.
B)a single, end-of-period-payment loan.
C)a short-term mortgage loan.
D)a committed line of credit.
Q2) The temporary working capital needs for Hasbeen Toys in quarter 1 is closest to:
A)$0 million
B)$340 million
C)$770 million
D)$845 million
Q3) Calculate the temporary working capital needs for each of the four quarters for Hasbeen Toys.
Q4) The temporary working capital needs for Hasbeen Toys in quarter 3 is closest to:
A)$845 million
B)$0 million
C)$770 million
D)$ 340 million
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Chapter 28: Mergers and Acquisitions
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Q1) A situation where every director serves a three-year term and the terms are staggered so that only one-third of the directors are up for election each year is called a: A)white knight.
B)classified board.
C)poison pill.
D)golden parachute.
Q2) What is a white knight?
Q3) If Rearden pays no premium to buy Associated Steel, then Rearden's earnings per share after the merger will be closest to:
A)$1.85
B)$1.90
C)$2.00
D)$2.25
Q4) If Martin pays no premium to acquire Luther, what will the earnings per share be after the merger?
Q5) Assume that Martin pays no premium to acquire Luther. Calculate Martin's price-earnings (P/E)ratio both pre and post merger.
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Chapter 29: Corporate Governance
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Q1) Which of the following statements is FALSE?
A)Recently, shareholders have started organizing "no" votes. That is, when they are dissatisfied with a board, they simply refuse to vote to approve the slate of nominees for the board.
B)One early study of proxy contests found that the announcement of a contest increased firm stock price by 8% on average, even if the challenge was eventually unsuccessful and the incumbents won reelection.
C)Shareholders' only real role in governance is in electing the directors of the company.
D)Perhaps the most extreme form of direct action that disgruntled shareholders can take is to hold a proxy contest and introduce a rival slate of directors for election to the board.
Q2) Backdating refers to:
A)choosing the strike price of a stock option retroactively.
B)choosing the exercise date of the stock option retroactively.
C)choosing the share conversion ratio retroactively.
D)choosing the grant date of a stock option retroactively.
Q3) Describe the "stakeholder" model of corporate governance.
Q4) What is the difference between Inside, gray, and outside directors?
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Page 31
Chapter 30: Risk Management
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Q1) If interest rates are currently 5%, but fall to 4%, your estimate of the approximate change in SFTSL equity is closest to:
A)8% decrease
B)12% decrease
C)8% increase
D)14% increase
Q2) Assuming that your firm will purchase insurance, what is the minimum-size deductible that would leave your firm with an incentive to implement the new safety policies?
Q3) The actuarially fair premium for this insurance policy is closest to:
A)$417,000
B)$446,000
C)$500,000
D)$568,000
Q4) If your firm is fully insured, the NPV of implementing the new safety policies is closest to:
A)$2.15 million
B)$2.5 million
C)$2.25 million
D)-$.25 million
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Chapter 31: International Corporate Finance
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Q1) Assuming that the Irish and Japanese subsidiaries did not exist, the U.S. tax liability on the Mexican subsidiary would be closest to:
A)$0
B)$9 million
C)$39 million
D)$106 million
Q2) Suppose the interest rate on Russian government bonds is 7.8%, and the current exchange rate is 26.8 rubles per dollar. If the forward exchange rate is 27.2 rubles per dollar, and the current U.S. risk-free interest rate is 4.6%, what is the implied credit spread for the Russian government bonds?
Q3) Assuming that the Irish and Mexican subsidiaries did not exist, the U.S. tax liability on the Japanese subsidiary would be closest to:
A)$0
B)$81 million
C)$103 million
D)$106 million
Q4) What conditions cause the cash flows of a foreign project to be affected by exchange rate risk?
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