In considering the value of a project,the NPV estimates for the subsidiary equals the:

Question

Quizplus · Accepted Answer

The NPV estimates for the subsidiary must be based on foreign cash flow from the project, as the subsidiary operates in a foreign country. To determine the appropriate discount rate, the foreign discount rate should be used as it reflects the risk and opportunity cost of capital in that particular country. Therefore, foreign cash flow from the project should be discounted at the appropriate foreign discount rate. Option B is the only choice that reflects this approach.

In Considering the Value of a Project,the NPV Estimates for the Subsidiary