Unremitted Cash Flows

The previous example assumed that all aftertax cash flows from the foreign investment could be remitted to (paid out to) the parent firm. Actually, substantial differences can exist between the cash flows generated by a foreign project and the amount that can actually be remitted, or "repatriated," to the parent firm.

A foreign subsidiary can remit funds to a parent in many forms, including the following:

1. Dividends

2. Management fees for central services

3. Royalties on the use of trade names and patents

However cash flows are repatriated, international firms must pay special attention to remittances for two reasons. First, there may be current and future controls on remittances. Many governments are sensitive to the charge of being exploited by foreign national firms. In such cases, governments are tempted to limit the ability of international firms to remit cash flows. Funds that cannot currently be remitted are sometimes said to be blocked.

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