For a parent that sells goods to a subsidiary,transfer pricing can have an effect on international capital expenditure analysis.A very low markup policy makes the APV of a subsidiary's capital expenditure appear

Question

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A very low markup policy means that the subsidiary is paying less for goods received from the parent, which makes the subsidiary's capital expenditure appear more attractive as it appears that they are able to generate higher profits due to the lower input costs.

For a Parent That Sells Goods to a Subsidiary,transfer Pricing