9. International capital budgeting Aa Aa One of the important components of mult

Question

9. International capital budgeting Aa Aa One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies Foreign governments often have restrictions on the amount of cash flows that the subsidiary company can repatriate to the parent company. Companies use different techniques to work around the restrictions. One such method is transfer pricing, which involves the subsidiary company obtaining raw materials from: A local vendor at a very low cost so that there is more profit left to repatriate O The parent company at a very low cost so that there is more profit left to repatriate O The parent company at a high cost so that there is less profit left to repatriate

Explanation / Answer

The maximum price should be no higher than the lowest market price at which the buying segment or company can acquire the goods or services external.

Ans) Under transfer pricing subsidiary Company acquired raw material from The Parent Company at a very low cost so that there os more profit left to repatriate.

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