Interaction between Financing and Investment Charleston Corp. is considering establishing a subsidiary in either Germany or the United Kingdom. The subsidiary will be mostly financed with loans from the local banks in the host country chosen. Charleston has determined that the revenue stream generated from the British subsidiary will be slightly more favorable than the revenue stream generated by the German subsidiary, even after considering tax and exchange rate effects. The initial outlay will be the same, and both countries appear to be politically stable. Charleston decides to establish the subsidiary in the United Kingdom because of the revenue advantage. Do you agree with its decision? Explain.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 17, Problem 17QA
Textbook Problem

Interaction between Financing and Investment Charleston Corp. is considering establishing a subsidiary in either Germany or the United Kingdom. The subsidiary will be mostly financed with loans from the local banks in the host country chosen. Charleston has determined that the revenue stream generated from the British subsidiary will be slightly more favorable than the revenue stream generated by the German subsidiary, even after considering tax and exchange rate effects. The initial outlay will be the same, and both countries appear to be politically stable. Charleston decides to establish the subsidiary in the United Kingdom because of the revenue advantage. Do you agree with its decision? Explain.

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