Impact of Reinvested Foreign Earnings on NPV. Flagstaff Corp. is a U.S.-based firm with a subsidiary in
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Impact of Reinvested Foreign Earnings on NPV. Flagstaff Corp. is a U.S.-based firm with a subsidiary in Mexico. It plans to reinvest its earnings in Mexican government securities for the next 10 years since the interest rate earned on these securities is so high. Then, after 10 years, it will remit all accumulated earnings to the United States. What is a drawback of using this approach? (Assume the securities have no default or interest rate risk.)
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