Question of the day
2026-08-14
How do you handle WACC for a company whose cash flows are in a foreign currency or emerging market?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
Match the discount rate's currency to the cash flows' currency: use that currency's risk-free rate and an equity risk premium appropriate to that market, typically adding a country risk premium (CRP) for emerging markets. Alternatively, build the WACC in your home currency and convert cash flows using forward exchange rates. The cardinal rule is consistency - never discount local-currency cash flows with a foreign-currency WACC without an explicit FX adjustment.
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