Ch.14 HW - Shaun Lans[email protected] FIN 4613 HW Ch.14...

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Shaun Lanshe @00717301 11/27/09 FIN 4613 HW Ch.14: Multinational Capital Budgeting Questions (1,3-6,12,14) 1. MNC Parent’s Perspective: Projects undertaken by MNC subsidiaries should always be considered from the perspective of the parent company (sometimes along with consideration from the perspective of the subsidiary). This is because the benefits of the project are ultimately for the parent company’s shareholders, and should thus be based on the yield to parent company stockholders. With MNC capital budgeting scenarios, additional factors to consider (compared to purely domestic projects) include: 1) exchange rate fluctuations, 2) remitted funds, 3) impact of project on prevailing parent cash flows, 4) host government incentives, and 5) real options. While, some of these factors are also considered in domestic project valuation, they pose unique challenges when implemented in a multinational capital budgeting analysis. 3. Uncertainty of Cash Flows: Uncertainty will surround the cash flows of a potential project in Hungary as follows:
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