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:

External Customers

Individuals or entities that are not part of an organization but use or purchase its products or services.

Reconciliation

The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement. It is a key accounting process.

Segment Profit Margin Analysis

The process of evaluating the profitability of different segments or divisions within a company.

Segment Liabilities

The liabilities related to a single reportable segment of a business, as opposed to the entire organization.