In Capital Budgeting for a Multinational, the Starting Discount Rate

question 59

Multiple Choice

In capital budgeting for a multinational, the starting discount rate to which risks stemming from foreign exchange and political factors can be added, and from which benefits reflecting the parent's lower capital costs may be subtracted is

• A) the cost of capital of the parent (multinational) company.
• B) the risk-free rate of the parent company, adjusted for risk relevant to the foreign subsidiary.
• C) the local cost of equity capital applicable to the local business and financial environments within which a subsidiary operates.
• D) the weighted average cost of capital applicable to all foreign subsidiaries combined.

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Definitions:

Genetic Male

An individual with one X chromosome and one Y chromosome in the pair of sex chromosomes, leading to the development of male physical characteristics.

Genetic Female

Refers to individuals whose sex chromosomes are XX, typically associated with female sexual and reproductive anatomy.

Estrogen

A group of steroid hormones that play an essential role in the development and regulation of the female reproductive system and secondary sexual characteristics.

Testosterone

A type of steroid hormone essential for developing male reproductive organs and secondary sexual traits.