When a foreign subsidiary is not wholly owned by the parent and a foreign project is partially financed with retained earnings of the parent and of the subsidiary, then:
A) the parent's perspective should be used to evaluate a foreign project.
B) the subsidiary's perspective should be used to evaluate a foreign project.
C) the foreign project should enhance the value of both the parent and the subsidiary.
D) None of these are correct.

Question

Quizplus · Accepted Answer

When a foreign project is partially financed with retained earnings of the parent and of the subsidiary, both the parent and the subsidiary have a stake in the project's success. Therefore, it is important that the foreign project enhances the value of both the parent and the subsidiary. Both perspectives should be considered in evaluating the project.

When a Foreign Subsidiary Is Not Wholly Owned by the Parent