CHAPTER 17 CAPITAL BUDGETING FOR THE MULTINATIONAL CORPORATION This chapter focuses on three aspects of foreign investment analysis that are infrequently considered in evaluating domestic projects: the difference between project and parent cash flows; incorporating political risks such as expropriation and currency controls; and factoring in inflation and exchange rate changes in cash flow estimates. It also evaluates the various methods used to incorporate in the investment analysis the additional
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Capital Budgeting: Capital budgeting is the process of determining whether or not an investment is worthwhile. Often companies will have several opportunities and must measure each one's potential in order to make a comparison and choose just one or a few. It is the process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order
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Executive Summary The function of this essay is to examine why ratio and financial statement analysis are useful to any corporations. The ratio analysis is a useful tool for managers and investors that would like to evaluate the company’s financial health. By using this analysis companies are able to identify opportunities for growth and areas of weakness to determine where corporations can put in place corrective measures in order to rectify their areas of weakness. Financial statements are used in
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The Finance Function in a Global Corporation Historically, the finance functions in large U.S. and European firms have focused on cost control, operating budgets, and internal auditing. But as corporations go global, a world of finance opens up within them, presenting new opportunities and challenges for CFOs. Rather than simply make aggregate capital-structure and dividend decisions, for example, they also have to wrestle with the capital structure and profit repatriation policies of their companies’
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in a Global Corporation The H 108 Harvard Business Review | by Mihir A. Desai HISTORICALLY, the finance functions in large U.S. and European firms have focused on cost control, operating budgets, and internal auditing. But as corporations go global, a world of finance opens up within them, presenting new opportunities and challenges for CFOs. Rather than simply make aggregate capital-structure and dividend decisions, for example, they also have to wrestle with the capital structure and
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Chapter 17 Multinational Financial Management Learning Objectives After reading this chapter, students should be able to: ◆ Define the term “multinational corporation” and identify 7 primary reasons why firms go international. ◆ List 5 major factors that distinguish financial management in firms operating entirely within a single country from those that operate in several different countries. ◆ Briefly explain the following terms: international monetary system, exchange rate,
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| |Entrance Competencies: | |1) Construct and analyze the financial statements of corporations.
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of the firm [chap. 1 & lecture] 2. valuation concepts and processes [chap. 3, 5, 8, 9, 29] 3. capital budgeting estimation and decision methods [chap.6, 7] 4. debt, equity and lease financing issues [chap. 14, 20, 21] 5. risk defined and measured in a CAPM setting [chap. 10, 11] 6. variations in the calculation of cost of capital [chap. 13, 18] 7. capital structure and dividend policy decisions [chap. 15, 16, 17, 19] Suggested Other Courses: FIN 644 concerns
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CAPITAL BUDGETING FOR MULTINATIONALS 13.1 INTRODUCTION Although the original decision to undertake an investment in a particular foreign country may be the outcome of combination of strategic, behavioural and economic considerations, choice of a specific project within a particular product-market posture calls for evaluation of its economic feasibility. For this purpose, capital budgeting exercise has to be done. A firm should deploy funds in a project if the marginal revenue obtained there from
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derivatives, exchange risk, exposure and risk management. This course assumes the viewpoint of the financial manager of a multinational corporation (MNC) with investment or financial operations in more than one country. Managers encounter new opportunities as they extend their operations into international markets, as well as new costs and risks. The challenge facing the multinational financial manager is to successfully develop and execute business and financial strategies in more than one national
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