Profitability of international subsidiary cash flows

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Reference no: EM131934717

Suppose you are analyzing the projected profitability of an international subsidiary’s cash flows from the parent’s perspective that would result from a potential capital investment. How should you handle each of the following in calculating the cash flows that come to the parent? Be specific.

1) An increase of $300,000 per year in the transfer price of intermediate goods charged to the subsidiary that will result from the new investment.

2) The $2,000,000 decline in Brazilian revenues that will result from lost tax incentives in the Brazilian subsidiary if the firm shifts production out of Brazil and into its new Indonesian subsidiary.

Reference no: EM131934717

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