Drexel Co$.$ is a U$.$S$.-$based company that is establishing a project in a politically unstable country. It is considering two possible sources of financing. Either the parent could provide most of the financing, or the subsidiary could be supported by local loans from banks in that country. Which financing alternative is more appropriate to protect the subsidiary?

I. Drexel should provide most of the financing by itself since local banks cannot protect the subsidiary from host government restrictions because they can become the subject of these restrictions themselves.

II$.$ Drexel should let local banks support the subsidiary since it would be in the interest of the banks to see that the subsidiary performs well. So$,$ the local banks would have been interested in protecting the subsidiary from host government restrictions.

III. Drexel may choose any source of financing as both alternatives do not protect the subsidiary from host government restrictions.