In Capital Budgeting for a Multinational Company, the Starting Discount

Multiple Choice

In capital budgeting for a multinational company, the starting discount rate to which risks stemming from foreign exchange and political factors can be added, and from which benefits reflecting the parent's lower capital costs may be subtracted is ________.

A) the cost of capital of the parent (multinational) company
B) the risk-free rate of the parent company, adjusted for risk relevant to the foreign subsidiary
C) the local cost of equity capital applicable to the local business and financial environments within which a subsidiary operates
D) the weighted average cost of capital applicable to all foreign subsidiaries combined