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Important information about Optimal Financing

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Wizard, Inc., has a subsidiary in a country where the government allows only a small amount of earnings to be remitted to the United States each year. Should Wizard finance the subsidiary with debt financing by the parent, equity financing by the parent, or financing by local banks in the foreign country?

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The solution explains optimal financing. A discussion of whether Wizard finance should subsidiary with debt financing by the parent, equity financing by the parent or financing by local banks in a foreign country is given.

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Wizard, Inc., should finance its subsidiary through the option which results to the highest value. This means that it has to finance the subsidiary with ...

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