You are a financial analyst for a US based multinational company, and you are in the process of putting together a proposal for a foreign investment in South America. You have been tasked with estimating the cash flows from the proposed investment, calculating its NPV, and making a recommendation about the project. In accordance with standard practice, you have calculated the projects NPV from two viewpoints: (i) from the parent companys viewpoint and (ii) the local viewpoint, also referred to as the project viewpoint.

Suppose that your analysis reveals that the NPV as computed from the parent companys viewpoint is positive, but that the NPV as computed from the local or project viewpoint is negative. Give two reasons why this might occur. Would you recommend that the project should be accepted or rejected? Explain your answer.