When a US-Based MNC Has a Subsidiary in Mexico That Needs Financing

question 50

Multiple Choice

When a U.S.-based MNC has a subsidiary in Mexico that needs financing, the MNC's exposure to exchange rate risk can be minimized if:

• A) the parent issues dollar-denominated equity and provides the proceeds to the subsidiary.
• B) the parent provides its retained earnings to the Mexican subsidiary.
• C) the subsidiary obtains a dollar-denominated loan from a financial institution.
• D) the subsidiary obtains a peso-denominated loan from a financial institution.

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Definitions:

Assigning Managers

The process of designating individuals to managerial positions where they are responsible for overseeing the work of others and making decisions on behalf of an organization.

Technologies

Refers to the application of scientific knowledge for practical purposes, especially in industry and improvements to tools, machines, and software.

James D. Thompson

A scholar known for his contributions to organizational theory, particularly regarding organizations as open systems.

Interdependence

A condition where entities are reliant on each other to achieve their goals or maintain existence.