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 the above

Question

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 the above

Quizplus · Accepted Answer

In this situation, both the parent and the subsidiary have a stake in the foreign project, and thus the project should aim to enhance the value of both entities. Therefore, neither the parent's nor the subsidiary's perspective should be favored over the other. A decision that benefits both parties should be made.

When a Foreign Subsidiary Is Not Wholly Owned by the Parent