QUESTION 1
A).Describe the additional complications facing an MNC compared with a domestic corporation when it is evaluating a capital budgeting project.
B).Why should an MNC’s capital budgeting decision be based on the parent’s results rather than those of the subsidiary?
C).Is an MNC generally faced with incurring double taxation on its profits in the subsidiary’s country? Why or why not?
Note- the uploaded attachment summarizes most of the answers.
QUESTION 2
• Define benefit and cost externalities. Explain why situations involving benefit externalities tend to result in an under-allocation of society’s scarce resources, and why situations involving cost externalities tend to result in an over-allocation of society’s scarce resources.
• Describe some of the types of intellectual property and why it is appropriate for the government to regulate intellectual property.
Sample Solution