Final answer:
It is false that an MNC will always use the same required rate of return for foreign projects as for domestic projects. Factors like currency risk and economic conditions affect the valuation of international investments which can lead to adjustments in the required rate of return.
Step-by-step explanation:
The statement 'An MNC will always use the same required rate of return in the valuation of foreign projects, as it would for its domestic projects' is false. When valuing foreign projects, a Multinational Corporation (MNC) must take into consideration various factors that differ from domestic projects. These factors include differences in economic conditions, currency risks, political risks, and market dynamics which may affect the project's cash flows and the company's cost of capital. The expected rate of return can lead to shifts in currency demand and supply, affecting the valuation of investments.
For example, if the United States has a higher rate of return compared to Mexico, investors might demand more U.S. dollars for financial investments, causing the dollar to appreciate. This fluctuation in exchange rates can influence the MNC's decision to invest and the required rate of return for projects in different countries.