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.

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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. Such restrictions are normally intended to: O Force multinational firms to reinvest earnings in the foreign country O Encourage large foreign denomination currency outflows O Expropriate the earnings that multinational firms generate in the foreign country Consider this case: Jing Associates Inc. is a U.S. firm evaluating a project in Australia. You have the following information about the project: .The project requires an investment of AU$1,340,000 today and is expected to generate cash flows of AU$1,000,000 at the end of each of the next two years. The current exchange rate of the U.S. dollar against the Australian dollar is $0.7795 per Australian dollar (AU$) The one-year forward exchange rate is $0.8088 / AU, and the two-year forward exchange rate is $0.8234/ AU$ The firm's weighted average cost of capital (WACC) is 9%, and the project is of average risk