📊 International Financial Management
Q. Assume the parent of a UK-based MNC plans to completely finance the establishment of its US subsidiary with existing funds from retained earnings in UK operations. According to the text, the discount rate used in the capital budgeting analysis on this project should be most affected by:
  • (A) the cost of borrowing funds in the U.K.
  • (B) the cost of borrowing funds in the U.S.
  • (C) the parent's cost of capital.
  • (D) A and B
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✅ Correct Answer: (C) the parent's cost of capital.

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