Toyota corporation is a Japanese automotive manufacturing company. The CFO is considering opening their new factory to assemble trucks in North Carolina, USA. The real discount rate required for the project is 12%. The inflation rate in Japan is 2%, and the inflation rate in the United States is 4%.
1.)Compare the nominal discount rates for the two project options, the first option is doing the project as an investment in US dollar, and the second option in their local currency the Japanese Yen.
2.) Evaluate and choose the best option, include in your answer the significance of inflation rates in relation to Foreign Investment of multinational corporations.
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