Assume an MNC establishes a subsidiary where it has no other existing business. The present value of parent cash flows from this subsidiary is more sensitive to exchange rate movements when:

Question

Quizplus · Accepted Answer

When the parent finances the entire investment, the cash flows are more exposed to exchange rate fluctuations because the returns need to be converted back to the parent's currency, increasing sensitivity to exchange rate movements.

Assume an MNC Establishes a Subsidiary Where It Has No