INTERNATIONAL PROJECT APPRAISAL.docVIP

　　INTERNATIONAL PROJECT APPRAISAL 　　 　　SHARE ON EMAILEMAIL SHARE ON PRINTPRINT SHARE ON TWITTERTWITTER SHARE ON FACEBOOKFACEBOOK SHARE ON LINKEDINLINKEDIN MORE SHARING SERVICESADD THIS 　　 　　RELATED LINKS 　　 　　Student Accountant hub page 　　 　　International project appraisal is an integral part of the Paper P4 syllabus, with two questions having been set on this topic under the current examiner (Q2 June 2011 and Q1 December 2011). 　　 　　The purpose of this series of articles is to assist your preparation for Paper P4 by demonstrating how to attempt exam questions on this area of the syllabus. Coupled with a comprehensive mode of study and revision, you should be ready for whatever the paper may contain. International project appraisal will be a large component of your studies, and I will demonstrate a systematic method of answering a question on this topic for each section of the exam. 　　 　　In this article, I will demonstrate how to answer a ‘Section B’ style 25-mark question. 　　 　　PENN CO 　　 　　Penn Co is successful company based in a European country where the local currency is the dollar and inflation has been stable at 5% pa. Income tax is charged on company profits at the rate of 25% and is payable in the same year as the profits are earned. 　　 　　The company is listed on several major stock exchanges as it has operations all over the globe. Its market capitalisation is $655m. The company has bonds with varying maturities trading at $145m. 　　 　　The treasury department of the company regularly computes the company’s nominal cost of capital and this has been fairly stable at 10%. However, when Penn Co have carried out projects in developing markets it has used a nominal risk-adjusted rate of 12%. 　　 　　Penn Co’s primary business is construction and laying of train tracks and tramlines. Their main consumers are governments due to Penn Co’s position as the market leader. Penn Co has a record of completing long and complex contracts within schedule, as well as conducting