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:

Structural Unemployment

A form of unemployment caused by shifts in the economy or changes in technology that create a mismatch between the skills of the workforce and the needs of employers.

Necessary Skills

The essential abilities and expertise required for effective performance in a specific job or activity.

Longer in Demand

Products or services that experience sustained interest and need from consumers over an extended period.

Federal Reserve System

The Federal Reserve System is the central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and provision of financial services.