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Terms of service Privacy policy Cookie policy Cookie settings Imprint Made with love in Switzerland © 2022 Yumpu.com all rights reserved Why should capital budgeting for subsidiary project be assessed from the parent perspective?The net present value (NPV) is a capital budgeting technique to estimate the profitability of investments or operations. Capital budgeting of the projects done by the subsidiary companies should be assessed from the viewpoint of the parent company because investment is allocated by the parent company.
Why is multinational capital budgeting necessary for a parent multinational corporation?Capital budgeting is important because it creates accountability and measurability. Any business that seeks to invest its resources in a project without understanding the risks and returns involved would be held as irresponsible by its owners or shareholders.
What are the factors to consider in multinational capital budgeting?Factors to Consider in Multinational Capital Budgeting. Exchange rate fluctuations. Different scenarios should be considered together with their probability of occurrence.. Inflation. ... . ŽFinancing arrangement. ... . Blocked funds. ... . Uncertain salvage value. ... . Impact of project on prevailing cash flows. ... . Host government incentives.. Why should an MNCs capital budgeting decision be based on the parent's results rather than those of the subsidiary?A parent's perspective is appropriate when evaluating a project, since any project that can create a positive NPV for the parent should enhance the firm's value. However, one exception to this rule may occur when the foreign subsidiary is not wholly owned by the parent.
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Subsidiary and Parent Perspective in relation to Multinational Capital Budgeting
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