The parent company should decide the financing method for its own subsidiaries
A)with a view toward minimizing the parent's overall cost of capital.
B)by copying the norms of the host country.
C)with a view toward gaming the bankruptcy system of the host country.
D)none of the above

Question

Quizplus · Accepted Answer

The parent company should decide the financing method for its subsidiaries with a view toward minimizing the parent's overall cost of capital. This is because in order to maximize the value of the entire organization, it is important to minimize the overall cost of capital. This can be achieved by using low-cost financing for subsidiaries in countries where borrowing costs are lower and high-cost financing for subsidiaries in countries where borrowing costs are higher. This will help achieve an optimal overall cost of capital for the organization. The other options, copying the norms of the host country or gaming the bankruptcy system of the host country, are not appropriate or ethical strategies for deciding financing methods.

The Parent Company Should Decide the Financing Method for Its