CH14 Multinational Capital Budgeting(国际金融管理,英文版).ppt

Multinational Capital Budgeting Chapter Objectives To compare the capital budgeting analysis of an MNC’s subsidiary with that of its parent; To demonstrate how multinational capital budgeting can be applied to determine whether an international project should be implemented; and To explain how the risk of international projects can be assessed. Subsidiary versus Parent Perspective Should the capital budgeting for a multi-national project be conducted from the viewpoint of the subsidiary that will administer the project, or the parent that will provide most of the financing? The results may vary with the perspective taken because the net after-tax cash inflows to the parent can differ substantially from those to the subsidiary. Subsidiary versus Parent Perspective The difference in cash inflows is due to : Tax differentials What is the tax rate on remitted funds? Regulations that restrict remittances Excessive remittances The parent may charge its subsidiary very high administrative fees. Exchange rate movements Online Application For country-specific information such as general business rules, regulations and tax rates, visit: the Price Waterhouse Coopers site at , /microsite/Global_Tax/CTR_Survey/index.html the Yahoo! International Finance Center at /ifc/. Remitting Subsidiary Earnings to the Parent Subsidiary versus Parent Perspective A parent’s perspective is appropriate when evaluating a project, since any project that can create a positive net present value for the parent should enhance the firm’s value. However, one exception to this rule may occur when the foreign subsidiary is not wholly owned by the parent. Input for MultinationalCapital Budgeting The following forecasts are usually required: 1. Initial investment 2. Consumer demand 3. Product price 4. Variable cost 5. Fixed cost 6. Project lifetime 7. Salvage (liquidation) value Input for MultinationalCapital Budgeting 9. Tax laws 10. Exchange rates 11. Required rate of return Online Applica