四川师范大学商学院国际财务管理英文 chapter10.pdfVIP

Chapter Ten Capital Budgeting in Foreign Subsidiaries Chapter Objectives: � To compare the capital budgeting analysis of an MNC’s subsidiary versus its parent; � To demonstrate how multinational capital budgeting can be applied to determine whether an international project should be implemented; � To explain how the risk of international projects can be assessed. 3 - 1 Subsidiary versus Parent Perspective Subsidiary versus Parent Perspective SSuubbssiiddiiaarryy vveerrssuuss PPaarreenntt PPeerrssppeeccttiivvee • 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. 3 - 2 Subsidiary versus Parent Perspective Subsidiary versus Parent Perspective SSuubbssiiddiiaarryy vveerrssuuss PPaarreenntt PPeerrssppeeccttiivvee Such differences can be due to: Such differences can be due to: • SSuucchh ddiiffffeerreenncceess ccaann bbee dduuee ttoo:: Tax differentials Tax differentials ¤ TTaaxx ddiiffffeerreennttiiaallss What is the tax rate on remitted funds? Regulations that restrict remittances Regulations that restrict remittances ¤ RReegguullaattiioonnss tthhaatt rreessttrriicctt rreemmiittttaanncceess Excessive remittances Excessive remittances ¤ EExxcceessssiivvee rreemmiittttaanncceess The parent may charge its subsidiary very high administrative fees. Exchange rate movements