Question: A company requires a 26% internal rate of return (before taxes) in U.S. dollars on project investments in foreign countries.
a. If the currency of Country A is projected to average an 8% annual devaluation relative to the dollar, what rate of return (in terms of the currency there) would be required for a project?
b. If the dollar is projected to devaluate 6% annually relative to the currency of Country B, what rate of return (in terms of the currency there) would be required for a project?