Question

In: Finance

Which of the following is true about the NPV of a foreign subsidiary's project?


Which of the following is true about the NPV of a foreign subsidiary's project?

a. administrative fees charged by the parent have no impact from the subsidiary fs perspective,

b. withholding taxes have no impact.

c. it can be negative from the subsidiary fs perspective, while can be positive from the parent fs point of view.

d. the same cost of capital needs by the parent needs to be used.

Solutions

Expert Solution

The correct answer is Statement A

The Net present value is the present value of all the cash flows that the project is going to generate over the years less initial investment. The discount rate is the cost of capital that the company pays to finance the capital.

The net present value of parent and subsidiary would be same though the cost of capital can be different. Therefore, Optionn D is Incorrect while administrative charges of parent would have no impact on subsidiary as both are separate entity. Therefore, Option A is correct.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Which of the following is true about fringe benefits? Which of the following is true about...
Which of the following is true about fringe benefits? Which of the following is true about fringe benefits? They represent additional compensation given for services performed They are only available for employees. The amount of the fringe benefit is never subject to income tax. They represent additional cash paid directly to employees.
Which of the following statements is true regarding the application of the NPV principle to multiple...
Which of the following statements is true regarding the application of the NPV principle to multiple projects under capital rationing? The project with the highest NPV will be selected. The project with the lowest NPV will be selected. All positive NPV projects should be accepted as long as the sum of the upfront costs exceed the capital budget. All positive NPV projects may not be accepted.
In regards to Capital Budgeting, which of the following would be considered true: 1. If NPV...
In regards to Capital Budgeting, which of the following would be considered true: 1. If NPV is negative, accept a project 2. If IRR>WACC, NPV will be positive 3. If IRR>WACC, NPV will be negative 4. Always accept a project with the lowest NPV
Which of the following statements about correlation are true?
4. Correlation basics Which of the following statements about correlation are true? Check all that apply Correlation is a numerical value between 1.1 and 2. The sign of the correlation indicates the strength or consistency of the linear relationship between two variables. A negative correlation means that two variables tend to change in opposite directions The correlation indicates the strength and the direction of the linear relationship between two variables If the correlation between two variables is 0, there is no clear linear relationship between the...
Which of the following statements about genetics is TRUE?
Which of the following statements about genetics is TRUE?  a. A mutation is any change in DNA that is harmful to an organism. b. Genetic disorders are always caused by the inheritance of recessive alleles. c. The red queen hypothesis proposes that asexual reproduction evolved in organisms to increase genetic variation, and therefore, improve resilience in ever-changing environments. d. Natural selection acts directly on the phenotype and indirectly on the genotype.
19. What is the NPV of the project? Which you accept the project?
19. What is the NPV of the project? Which you accept the project?
Decide which of the following statements are True and which are False about equilibrium systems: True...
Decide which of the following statements are True and which are False about equilibrium systems: True False  For the following reaction: H2(g) + F2(g) ⇌ 2HF(g) the values of K and Kp are not the same. True False  A large value of K means the equilibrium position lies far to the left. True False  For a reaction with K >> 1, the rate of the forward reaction is greater than the rate of the reverse reaction at equilibrium. True False  For the following reaction:...
Which of the following is NOT true about licensing? a. Licensing is the practice in which...
Which of the following is NOT true about licensing? a. Licensing is the practice in which a company or individual provides the foreign partner with the technology to manufacture and sell products or services in a target country for an annual fee b. When a product is licensed, the foreign partner will use the licensor’s patented technology as agreed to manufacture and sell products that meet the licensor’s standards. c. The license fee could be based on a percentage of...
Calculate the NPV for each project and determine which project should be accepted. Project A Project...
Calculate the NPV for each project and determine which project should be accepted. Project A Project B Project C Project D Inital Outlay (105,000.000) (99,000.00) (110,000.00) (85,000.00) Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00 Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00 Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00 Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00 Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00 Rate 7% 10% 13% 18% Your company is considering three independent projects. Given the following cash flow information,...
Calculate the NPV for each project and determine which project should be accepted. Project A Project...
Calculate the NPV for each project and determine which project should be accepted. Project A Project B Project C Project D Initial Outlay (105,000.00) (99,000.00) (110,000.00) (85,000.00) Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00 Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00 Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00 Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00 Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00 Rate 7% 10% 13% 18% NPV = $75,228.32 $77,364.07 -$2,531.00 $69,006.08 Answer: Project B How to show work...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT