Which of the Following Statements About Determining the Appropriate Cost

question 26

Multiple Choice

Which of the following statements about determining the appropriate cost of capital for a foreign subsidiary of a U.S. corporation (owned by U.S. investors) is true?

• A)It is both simpler and more appropriate to use the cost of capital of the U.S.-based operations to evaluate projects to be undertaken by a foreign subsidiary.
• B)A U.S. corporation should consider how its foreign operations covary with the U.S. stock market when calculating the cost of capital for a foreign subsidiary.
• C)A U.S. corporation should consider how its foreign subsidary's cash flows covary with the exchange rate for the currency of the country in which that subsidiary is located when
• Calculating the cost of capital for a foreign subsidiary.
• D)In calculating a foreign subsidiary's cost of capital, a U.S. corporation needs to determine how its projects covary with the global market.

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Definitions:

Time Perspective

is the way individuals conceptualize time and the effect of this conceptualization on their behavior, decisions, and overall outlook on life.

Legislative Agenda

A set of priorities and proposed laws that a legislative body or a political leader aims to enact and implement during a legislative session.

Oversight Powers

The authority granted to legislative bodies to review, monitor, and supervise federal agencies, programs, activities, and policy implementation.

Executive Branch

The branch of government responsible for implementing and enforcing laws, headed by the President in the United States.