Assume an MNC Establishes a Subsidiary in a Country Where

question 9

Multiple Choice

Assume an MNC establishes a subsidiary in a country where it has no other existing business. The present value of parent cash flows from this subsidiary is more sensitive to exchange rate movements when:​

• A) ​the subsidiary finances the entire investment by local borrowing.
• B) ​the subsidiary finances most of the investment by local borrowing.
• C) ​the parent finances most of the investment.
• D) ​the parent finances the entire investment.

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Definitions:

Probability

A numerical gauge on a scale from 0 to 1 reflecting how likely an event is to occur.

Asia

A continent located primarily in the Eastern and Northern Hemispheres, known as the largest and most populous continent.

Deck

A platform, typically outdoors, attached to a building; or, a collection of playing cards or slides used in a presentation.

Chances

A synonym for probability, focusing on the possibility of a particular event occurring.