Answer (D) is correct . The cost of capital is typically higher for foreign projects for a variety of reasons, including exchange-rate risk, political risk, and limitations on sources of financing that often require a certain percentage of domestic ownership. Trigger pricing is not a cause. Trigger pricing is a means of managing exchange-rate risk by supplying foreign funds at an indexed price, but with an option to convert to a futures-based fixed price when a specified basis differential exists between the two prices.
Answer (A) is incorrect because They are all causes of higher costs of capital in foreign projects.
Answer (B) is incorrect because They are all causes of higher costs of capital in foreign projects.
Answer (C) is incorrect because They are all causes of higher costs of capital in foreign projects.
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