Question

In Multinational Capital budgeting, project cash flows can diverge from parent cash flows because of the following factors, except?

A. Foreign exchange risks.
B. Size of the subsidiary.
C. Political risk and Country risk.
D. The existence of growth options.
E. Cannibalization due to the replacement of exports by local production.

Answer 1

Answer: E. Cannibalization due to the replacement of exports by local production.

Step-by-step explanation:

Multinational capital budgeting simply means when real productive assets is invested in foreign countries.

In Multinational Capital budgeting, project cash flows can diverge from parent cash flows because of foreign exchange risks, subsidiary size, political and country risk and the existence of growth options.

The cannibalization due to replacement of exports by local production isn't among the factors.