Currency Choices in Valuation: An Approach for Emerging Markets

Abstract

One of the common issues in Valuation in emerging markets is the choice of the currency for the Valuation and how it affects the inputs. Very often, multinational companies, when valuing an investment or an acquisition in an emerging market, are required to express expected cash flows in a strong currency, usually dollars. Since these investments generate sales, expenses and cash flows in domestic currency, it is necessary to forecast the exchange rate for the investment horizon.