Question

The feasibility of a multinational project from the parent's perspective is dependent not on the subsidiary cash flows but on the cash flows that it ultimately receives. True False

Answer 1

Answer:

True

Explanation:

Under multinational projects, a multi national company sets up a business unit in another country, known as subsidiaries, to benefit from factors such as cheap labor, better market for products, availability of resources, etc.

The subsidiaries set up at different nations, report their profitability to the parent as well as repatriate a portion of their profits earned.

Feasibility or viability of a multinational project depends upon the repatriated profits that the parent eventually receives from the subsidiary.

Subsidiary cash flows do not define the viability since the parent company's and host nation's currencies differ. Thus, a US parent company which has a subsidiary in Vietnam, would be only bothered of the US Dollars repatriated by such a subsidiary.