Of the Following, Which Is NOT an Internal Source of Financing

question 20

Multiple Choice

Of the following, which is NOT an internal source of financing for the foreign subsidiary?

• A) equity in the form of cash from the parent firm
• B) equity in the form of real goods from the parent
• C) debt in the form of loans from the same commercial bank used by the parent
• D) All of the above are internal sources of financing for the foreign subsidiary.

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Definitions:

Risk-free Rate

The theoretical rate of return on an investment with zero risk, typically represented by the yield on government bonds.

Flotation Costs

The expenses incurred by a company in issuing new securities, including underwriting, legal, registration, and printing fees.

WACC Adjustment

The process of modifying the Weighted Average Cost of Capital to reflect changes in the market or the firm's risk profile.

Financing Scenarios

Different strategies and options available for a business or individual to raise capital or fund operations.