If an MNC exports to a country and then establishes a subsidiary to produce and sell the same product in that country, cash flows from existing operations would likely be ____ affected by the project. If an MNC establishes a foreign manufacturing subsidiary that buys components from the parent, the cash flows from existing operations would likely be ____ affected by the project.
A) adversely; adversely
B) favorably; adversely
C) favorably; favorably
D) adversely; favorably

Question

If an MNC exports to a country and then establishes a subsidiary to produce and sell the same product in that country, cash flows from existing operations would likely be ____ affected by the project. If an MNC establishes a foreign manufacturing subsidiary that buys components from the parent, the cash flows from existing operations would likely be ____ affected by the project.​
A) ​adversely; adversely
B) ​favorably; adversely
C) ​favorably; favorably
D) ​adversely; favorably

Quizplus · Accepted Answer

If an MNC exports to a country and then establishes a subsidiary to produce and sell the same product in that country, cash flows from existing operations would likely be adversely affected by the project. This is because the establishment of the subsidiary may lead to increased competition and cannibalization of sales from the parent company's existing operations.

If an MNC establishes a foreign manufacturing subsidiary that buys components from the parent, the cash flows from existing operations would likely be favorably affected by the project. This is because the subsidiary's purchases from the parent would increase the parent's revenues and profits without affecting its existing operations.

If an MNC Exports to a Country and Then Establishes