CH 14 Abbr - C H A P T E R 14 14 Multinational Capital...

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Unformatted text preview: C H A P T E R 14 14 Multinational Capital Budgeting Chapter Overview Chapter A. Subsidiary versus Parent Perspective B. Input for the Multinational Capital Budgeting C. Factors to Consider in Multinational Capital Budgeting D. Adjusting Project Assessment for Risk Chapter 14 Objectives Chapter This chapter will: A. Compare the capital budgeting analysis of an MNC’s subsidiary versus its parent B. Demonstrate how multinational capital building can be applied to determine whether an international project should be implemented C. Explain how the risk of international projects can be assessed. A. Subsidiary versus Parent Perspective 1. Tax Differentials 1. Tax Differentials 2. Restricted Remittances 3. Excessive Remittances 4. Exchange Rate Movements 5. Summary of Factors Process of Remitting Subsidiary Earnings to Parent 14.1 14.1 B. Input for the Multinational Capital Budgeting Capital 1. Economic and Financial Characteristics Involved a. Initial Investment b. Price and Consumer Demand c. Costs d. Tax Laws e. Remitted Funds f. Exchange Rates g. Salvage Value h. Required Rate of Return C. Factors to Consider in Multinational Capital Budgeting Multinational 1. Exchange Rate Fluctuations 2. Inflation Sensitivity of the Project’s NPV to Different Exchange Rate Scenarios: Spartan, Inc. 14.4 14.4 C. Factors to Consider in Multinational Capital Budgeting Multinational 3. Financing Arrangement a. Subsidiary Financing b. Parent Financing c. Comparison of Parent versus Subsidiary Financing d. Financing with Other Subsidiaries’ Retained Earnings C. Factors to Consider in Multinational Capital Budgeting Multinational 4. Blocked Funds 5. Uncertain Salvage Value 6. Impact of Project on Prevailing Cash Flows 7. Host Government Incentives 8. Real Options D. Adjusting Project Assessment for Risk for 1. Risk­Adjusted Discount Rate 2. Sensitivity Analysis 3. Simulation ...
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