Valuation: Measuring and Managing the Value of Companies, Fifth Edition
Chapter 30 Solutions
Foreign Currency
1. The real risk-free rate will be the same in different countries. The nominal risk-free rate
2. The main problem is that there will be a dispersion of expert forecasts, and each forecast
will have an error. One choice of a forecast is to use the forward rate, but there is a
3. Differences in the domestic industries of each country can explain most of the differences
4. A few conditions had more relevance in the past. As the world has developed, however,
their role has become much less important. One condition would be if the local market is
5. The manager should use a WACC that applies to the country of the subsidiary and not
6. There are two reasons for understanding the historical differences between GAAP and
IFRS. The most practical reason is that in assessing a firm and making forecasts, an
7. The current, temporal, and inflation-adjusted current methods have differences, which
can make each an appropriate choice based on the inflation rates in the different countries
When hyperinflation exists, GAAP requires the use of the temporal method. This much
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When hyperinflation exists, IFRS requires the inflation-adjusted current method, which is
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