Restrictions on a Project,because of Which a Firm May Not

question 9

Multiple Choice

Restrictions on a project,because of which a firm may not be able to remit all its cash flows to the parent company:

• A)do not affect the net present value of the project to the parent company.
• B)do not affect the net present value of the project itself.
• C)do not limit the cash flows of the parent company in any manner.
• D)establishes the fact that a foreign project need not be analyzed from the perspective of the parent company.

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Definitions:

Standard & Poor's

A financial market intelligence company known for its stock market indices such as the S&P 500, as well as its credit ratings of borrowers.

Liquidity Preference Theory

A theory that suggests investors demand a higher interest rate or premium on securities with longer maturities to compensate for the increased risk of holding them.

Term Structure

The relationship between interest rates or bond yields and different terms to maturity, represented graphically by the yield curve.

Interest Rates

The amount charged by lenders as a percentage of the amount borrowed, representing the cost of borrowing money.