When assessing a German project administered by a German subsidiary of a U.S.-based MNC solely from the German subsidiary's perspective, which variable will most likely influence the capital budgeting analysis?
A)the withholding tax rate
B)the euro's exchange rate
C)the U.S. tax rate on earnings remitted to the United States
D)the German government's tax rate
E)A and C

Question

When assessing a German project administered by a German subsidiary of a U.S.-based MNC solely from the German subsidiary's perspective, which variable will most likely influence the capital budgeting analysis?​
A)the withholding tax rate
B)the euro's exchange rate
C)the U.S. tax rate on earnings remitted to the United States
D)the German government's tax rate
E)A and C

Quizplus · Accepted Answer

When assessing a German project from the perspective of a German subsidiary, the most influential variable in the capital budgeting analysis would be the German government's tax rate. This is because the subsidiary would be subject to German taxation laws and regulations, which could significantly impact the project's profitability and viability. The other variables such as withholding tax rate, euro's exchange rate, and U.S. tax rate on earnings remitted to the United States may also have an impact, but they are not as significant as the local tax regulations. Therefore, option D is the best choice.

When Assessing a German Project Administered by a German Subsidiary