Assume the Parent of a U

question 33

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

---

Definitions:

Synfuels

Synthetic fuels that are produced from coal, natural gas, or biomass through chemical processes, used as an alternative to traditional fossil fuels.

Chernobyl Nuclear Disaster

A catastrophic nuclear accident that occurred on April 26, 1986, at the Chernobyl Nuclear Power Plant in Ukraine, leading to widespread radioactive contamination.

Moderator

A person or substance that reduces the pace of a chemical reaction or moderates the discussion in a meeting or forum.

Nuclear Reactor

A device used to initiate and control a sustained nuclear chain reaction, primarily for the generation of electricity.