Impact of Financing on NPV
Response to the following problem:
Ventura Corp., a U.S.-based MNC, plans to establish a subsidiary in Japan. It is confident that the Japanese yen will appreciate against the dollar over time. The subsidiary will retain only enough revenue to cover expenses and will remit the rest to the parent each year. Will Ventura benefit more from exchange rate effects if its parent provides equity financing for the subsidiary or if the subsidiary is financed by local banks in Japan? Explain