Question

To assess a Canadian project administered by a Canadian subsidiary of a U.S.-based MNC solely from the Canadian subsidiary's perspective, which variable will most likely influence the capital budgeting analysis?

the withholding tax rate

the Canadian government's tax rate the

U.S. tax rate on earnings remitted to the United States

the Canadian dollar's exchange rate

Answer 1

The correct answer is the Canadian government's tax rate

From the Subsidiary point of view locate in canada, the variable that will most likely influence the capital budgeting process is the tax rate because the company has to pay the taxes according to the country in which located and it affects the cash flow of the projects. Therefore, this is the correct answer.