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

Understand the components and significance of the balance of payments accounts.

Examine how currency valuation affects international investment flows and trade balances.

Understand the transition from the U.S. being a creditor nation to becoming a debtor nation and its implications.

Analyze the relationship between personal savings rates and the current account balance.