How do licensing agreements, royalties, and overhead allocation fees affect the value of a foreign project?

What will be an ideal response?

Licensing agreements, royalties, and overhead allocation fees are true costs to the subsidiary or to the stand-alone firm that would be operating in the foreign country producing and selling the products of the multinational corporation. Thus, licensing agreements, royalties, and overhead allocation fees reduce the income in the foreign country. Nevertheless, these cash flows provide profit to the parent corporation. Licensing agreements and royalties provide pure profit to the parent as no costs are incurred, and overhead fees provide net profit as they cover costs incurred by the parent. Thus, these cash flows are quite valuable to the parent.