Assume the Parent of a U

question 32

Multiple Choice

Assume the parent of a U.S.based MNC plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings in U.S.operations.  According to the text,the discount rate used in the capital budgeting analysis on this project should be most affected by:

• A) the cost of borrowing funds in the U.K.
• B) the cost of borrowing funds in the U.S.
• C) the parent's cost of capital.
• D) A and B

Analyze the effect of timing decisions on project value and risk.

Explain the relationship between real option valuation and project risk management.

Understand the role of real options in strategic investment decisions.

Understand the benefits and drawbacks of export promotion and import substitution policies for economic growth.

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Definitions:

Brainstorming

A method of generating ideas through spontaneous and free-flowing group discussion.

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