Which cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars
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Which cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars?
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- What are the relevant cash flows for an international investment:the cash flow produced by the subsidiary in the country whereit operates, or the cash flows in dollars that it sends to its parentcompany?What are the relevant cash flows for an international investment—the cash flowsproduced by the subsidiary in the country in which it operates or the cash flows indollars that it sends to its parent company? Explain.Discuss any current financial issues that affect the operating environment of the MNC distibuting via export and explain how these issues affect the company’s foreign currency exposure
- Functional currency is the currency that influences sales price, labour, material and other costs of a company’s goods and services. (a) Explain factors that should also be considered to determine the functional currency of a foreign operation. (b) Explain what will happen if a business transaction is denominated in foreign currency but reported in functional currency.How can the optimization of a mutltinational corporation cash flow distort the profits of a subsidiary that is based in North America?What are the circumstances under which the capital expenditure of a foreign subsidiary might have a positive NPV in local currency terms but be unprofitable from the parent firm’s perspective?
- Which of the following is matter if a U.S. parent firm plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings. The discount rate of the NPV from the project would be affected by ______. A. the parent's cost of capital B. the sales volume of the subsidiary C. the economic conditions D. the cost of borrowingA. Capital flows B. Direct foreign investment C. Indirect foreign investment occurs when a company from one country makes a physical investment, such building a manufacturing facility, in another countryFirms use a variety of methods to conduct business internationally. Consider the case of an MNC conducting international business via the use of international trade. When this method of conducting international business is used, cash inflows come from ? while cash outflows flow to ? .
- Direct foreign investment into the United States represents a ____. capital outflow trade outflow capital inflow trade inflowIf you are the manager, you should understand which of the operations do not create benefit from depreciation of the firm's local currency. I. Borrowing in a foreign country and converting the funds to the local currency prior to the depreciation. II. Purchasing foreign supplies. III. Investing in foreign bank accounts denominated in foreign currencies prior to depreciation of the local currency. A. I, IV B. II, IV C. I, II D. II, IIIWhat modifications may be made to the domestic cost of capital for a foreign venture to account for currency rate and political risk?
