What Affect Do Below Market Interest Rates in the Foreign

question 26

Multiple Choice

What affect do below market interest rates in the foreign country where a subsidiary will operate have on the NPV calculations for a proposed project by the subsidiary?

• A)The below market interest rate in the foreign country will result in a higher NPV to the subsidiary than the NPV to the parent.
• B)The below market interest rate will quickly attract firms seeking loans,and the below market rates will rise quickly,negating any benefit to the parent or the subsidiary.
• C)The below market interest rates in the foreign country will result in a higher NPV to the parent than the NPV to the subsidiary.
• D)Financing cash flows are not considered in NPV calculations,so interest rates will not affect the NPV calculations.

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Definitions:

Ethmoidal Sinus

Air-filled spaces located within the ethmoid bone between the nose and eyes, part of the paranasal sinuses.

Maxillary Sinus

The maxillary sinus is one of the four pairs of paranasal sinuses that are located within the bones of the face and cheeks, specifically within the maxilla or upper jaw bone.

Lordosis

A curvature of the spine that results in an exaggerated inward curve of the lower back.

Kyphosis

A spinal disorder where there is an excessive outward curve of the spine, leading to a hunchback appearance.