If a foreign project is financed with a subsidiary's retained earnings, the subsidiary's investment could be viewed as an opportunity cost, since the funds could be remitted to the parent rather than invested in the foreign project.

Question

Quizplus · Accepted Answer

Retained earnings are funds that have been earned by the subsidiary but have not been paid out as dividends to the parent company. If the subsidiary chooses to use these funds to finance a foreign project, it means that the parent company is forgoing the opportunity to receive those funds as dividends. Therefore, the subsidiary's investment in the foreign project can be viewed as an opportunity cost for the parent company.

If a Foreign Project Is Financed with a Subsidiary's Retained