Assume the Parent of a U

question 32

Multiple Choice

Assume the parent of a U.S.-based MNC plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings in U.S. operations. According to the text, the discount rate used in the capital budgeting analysis on this project should be most affected by:

• A) the cost of borrowing funds in the U.K.
• B) the economic conditions in the U.K.
• C) the parent's cost of capital.
• D) A and B

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