IB20 - Chapter 20 Financial Management subttulo del Haga...

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Haga clic para modificar el estilo de subtítulo del patrón 8/18/11 Chapter 20 Financial Management in the International Business
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8/18/11 Introduction Financial management involves three sets of decisions 1. investment decisions – decisions about what to finance 2. financing decisions – decisions about how to finance those decisions 3. money management decisions – decisions about how to manage the firm’s financial resources most efficiently
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8/18/11 Introduction Good financial management can be a source of competitive advantage Firms with good financial management can reduce the costs of creating value and add value by improving customer service
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8/18/11 Investment Decisions Financial managers must quantify the benefits, costs, and risks associated with an investment in a foreign country To do this, managers use capital budgeting
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8/18/11 Capital Budgeting Capital budgeting quantifies the benefits, costs, and risks of an investment This involves estimating the cash flows associated with the project over time, and then discounting them to determine their net present value If the net present value of the discounted cash flows is greater than zero, the firm should go ahead with the project
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8/18/11 Capital Budgeting Capital budgeting is complicated in international business: because a distinction must be made between cash flows to the project and cash flows to the parent company by political and economic risk because the connection between cash flows to the parent and the source of financing must be recognized
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8/18/11 Project And Parent Cash Flows Cash flows to the project and cash flows to the parent company are not necessarily the same Cash flows to the parent may be lower for various reasons including host country limits on the repatriation of profits, host country local reinvestment requirements, and so on For the parent company, the key figure is the cash flows it will receive, not the cash flows the project generates because received cash flows are the basis for dividends, other
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8/18/11 Adjusting For Political And Economic Risk The analysis of a foreign investment opportunity includes an assessment of political and economic risk Political risk is the likelihood that political forces will cause drastic changes in a country’s business environment that hurt the profit and other goals of a business Political risk is higher in countries with social unrest or disorder, or where the nature of the society increases the chance for social unrest Political change can result in the expropriation
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This note was uploaded on 08/17/2011 for the course BUSL 01342 taught by Professor Jenkins during the Winter '10 term at Ohio University- Athens.

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IB20 - Chapter 20 Financial Management subttulo del Haga...

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