Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 14
Multinational Capital Budgeting
Lecture Outline
Subsidiary versus Parent Perspective
Tax Differentials
Restrictions on Remitted Earnings
Exchange Rate Movements
Summary of Factors That Distinguish the Parent Perspective
Input for Multinational Capital Budgeting
Multinational Capital Budgeting Example
Background
Analysis
Other Factors to Consider
Exchange Rate Fluctuations
Inflation
Financing Arrangement
Blocked Funds
Uncertain Salvage Value
Impact of Project on Prevailing Cash Flows
Host Government Incentives
Real Options
Adjusting Project Assessment for Risk
Risk-Adjusted Discount Rate
Sensitivity Analysis
Simulation
Chapter Theme
This chapter identifies additional considerations in multinational capital budgeting versus domestic
capital budgeting. These considerations can either be illustrated with the use of an example. The analysis
in this chapter is also applied in subsequent chapters and therefore is very important.
Topics to Stimulate Class Discussion
1. Create an idea for a firm to expand its operations overseas. Provide the industry of the firm. Given
this information, students should be requested to list all information that needs to be gathered in order
to conduct a capital budgeting analysis.
2. How should a firm adjust the capital budgeting analysis for investment in a country where the
currency is extremely volatile?
3. How should a firm adjust the capital budgeting for investment in a country where the chance of a
government takeover is relatively high?
