Discuss factors that must be considered for capital budgeting for an MNC’s foreign subsidiary that might not be considered for domestic investment
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Discuss factors that must be considered for capital budgeting for an MNC’s foreign subsidiary that might not be considered for domestic investment
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- Why should capital budgeting for subsidiary projects be assessed from the parent’s perspective? What additional factors that normally are not relevant for a purely domestic project deserve consideration in multinational capital budgeting?Discuss the important factors one should consider in the international capital budgeting process to be undertaken by a multinational firm.What do managers use to evaluate domestic and international capital investment projects? A) capital budgeting B) multilateral netting C) net present value D) transfer pricing E) parent's perspective
- what risks and capital budgeting issues may arise with international investments and what strategies will help to reduce these risks.Which of the following investment criteria are commonly used by Canadian firms in their capital budgeting decisions? Select one: a. net present value b. internal rate of return c. payback period d. a and b only e. a, b, and cWhich cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars?
- What are the relevant cash flows for an international investment:the cash flow produced by the subsidiary in the country whereit operates, or the cash flows in dollars that it sends to its parentcompany?9. International capital budgeting Aa Aa One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Foreign governments often have restrictions on the amount of cash flows that the subsidiary company can repatriate to the parent company. Companies use different techniques to work around the restrictions. One such method is transfer pricing, which involves the subsidiary company obtaining raw materials from: A local vendor at a very low cost so that there is more profit left to repatriate The parent company at a high cost so that there is less profit left to repatriate The parent company at a very cost so that ther is more profit left to repatriate Consider this case: Sacramone Products Co. is a U.S. firm evaluating a project in Australia. You have the following information about the project: The project requires an investment of AU$800,000 today and is expected to generate cash flows of AU$900,000 at the end of…Explain the differences of two: Domestic Capital Budgeting and Multinational Capital Budgeting
- What are the relevant cash flows for an international investment—the cash flowsproduced by the subsidiary in the country in which it operates or the cash flows indollars that it sends to its parent company? Explain.Which of the following is matter if a U.S. parent firm plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings. The discount rate of the NPV from the project would be affected by ______. A. the parent's cost of capital B. the sales volume of the subsidiary C. the economic conditions D. the cost of borrowingExplain the difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the subsidiary project's perspective.