Assume the Parent of a U

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 from U.S. operations. According to the text, the discount rate used in the capital budgeting analysis on this project will be most affected by:

A) the cost of borrowing funds in the United Kingdom.
B) the economic conditions in the United Kingdom.
C) the parent's cost of capital.
D) the cost of borrowing funds in the United Kingdom AND the economic conditions in the United Kingdom.
Answer Key