The home currency approach employs uncovered interest parity to project future exchange rates.
In the home currency approach, the net present value of a foreign project is determined by -
(a) converting the foreign-currency cash flows of the project to the domestic currency based on the expected forward exchange rates
(b) discounting the cash flows based on the domestic currency cost of capital.
The home currency approach is one of the methods used in international capital budgeting.
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