Assume an MNC Establishes a Subsidiary in a Country Where

Multiple Choice

Assume an MNC establishes a subsidiary in a country where it has no other existing business. The present value of parent cash flows from this subsidiary is more sensitive to exchange rate movements when:​

A) ​the subsidiary finances the entire investment by local borrowing.
B) ​the subsidiary finances most of the investment by local borrowing.
C) ​the parent finances most of the investment.
D) ​the parent finances the entire investment.