Suppose it is your task to evaluate two different investments in new subsidiaries for your company, one in your own country and the other in a foreign country. You calculate the cash flows of both projects to be identical after exchange rate differences. Under what circumstances might you choose to invest in the foreign subsidiary? Give an example of a country where certain factors might influence you to alter this decision and invest at home. Oa, One possible reason investment in the foreign subsidiary might be preferred is if this investment provides direct diversification that shareholders could not attain by investing on their own. Another reason could be if the political climate in the foreign country was more stable than in the home country. Increased political risk can also be a reason you might prefer the home subsidiary investment. Indonesia can serve as a great example of political risk. If it cannot be diversified away, investing in this type of foreign country will increase the systematic risk. As a result, it will raise the cost of the capital and could actually decrease the NPV of the investment Ob. One possible reason investment in the foreign subsidiary might be preferred is if this investment provides provide a tax loss to increase tax efficiency for the individual investors. Another reason could be if the political climate in the home country was more stable than in the foreign country. Increased political risk can also be a reason you might prefer the home subsidiary investment. Canada can serve as a great example of political risk. If it cannot be diversified away, investing in this type of foreign country will increase the systematic risk. As a result, it will raise the cost of the