If a foreign project is financed with a subsidiary's retained earnings, the subsidiary's investment could be viewed as an opportunity cost, since the funds could be remitted to the parent rather than invested in the foreign project.

Question

Quizplus · Accepted Answer

Retained earnings are the profits that a subsidiary company has accumulated over the years but have not distributed as dividends to its parent company. Using these retained earnings to finance a foreign project can be considered as an opportunity cost since the subsidiary could have remitted the funds back to its parent instead of investing in the foreign project. Therefore, the statement is true.

If a Foreign Project Is Financed with a Subsidiary's Retained