Multinational Capital Budgeting International Financial Management Dr. A. DeMaskey Learning Objectives How does domestic capital budgeting differ from multinational capital budgeting? How do incremental cash flows differ from total project cash flows? What is the difference between foreign project cash flows and parent cash flows? How does APV analysis differ from NPV analysis? How is the capital budgeting analysis adjusted for the additional economic and political risks
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Capital Budgeting Decision Process 1. Introduction The maximization of shareholder wealth can be achieved through dividend policy and increasing share price of the mark value. In order to derive more profits‚ our company shall invest potential investments which always cover a number of years. Those investments involve substantial initial outlay at the outset and the process. The management is responsible to participate in the process of planning‚ analyzing‚ evaluating‚ selecting
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Notes: FIN 303 Spring 09‚ Part 8 – Topics in Capital Budgeting Professor James P. Dow‚ Jr. Part 8. Topics in Capital Budgeting In part 7 we learned the basics of capital budgeting. However‚ we ignored some of the complications that can arise when evaluating projects. In this section we look at a few of those issues. How Uncertainty Affects the Capital Budgeting Decision Every project has uncertainty and so we need to determine how risk affects how we make decisions. Large corporations often use
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What are the primary strengths and weakness of the current system? How should the performance of such a system be evaluated? The capital budgeting system at Stryker Corporation made use of formalized CER forms by which individual divisions within Stryker documented the goals for revenue‚ operating profit and cash flow across in a way that were deliverable and consistent with global corporate targets. The CER system is a rigorous one requiring thorough documentation before the divisions obtain
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A Case Study on Capital City Bank Management 12 – G Aseñas‚ Earl Adrian C. Buenavista‚ Gil J. Dineros‚ Georgette Mae P. Lu‚ Christine Y. Refamonte‚ Ma. Nathalie D. Tubat‚ Divina Mari A. February 5‚ 2014 I. CENTRAL PROBLEM What should the management of Capital City Bank do to avoid similar problems in the future? II. Alternative Courses of Action (ACA) A. ACA #1 - Assign someone to constantly check on all accounts of the bank to assure that there are no odd cases.
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INTRODUCTION TO CAPITAL BUDGETING Overview 159 7.1 The NPV Rule for Judging Investments and Projects 159 7.2 The IRR Rule for Judging Investments 161 7.3 NPV or IRR‚ Which to Use? 162 7.4 The “Yes–No” Criterion: When Do IRR and NPV Give the Same Answer? 163 7.5 Do NPV and IRR Produce the Same Project Rankings? 164 7.6 Capital Budgeting Principle: Ignore Sunk Costs and Consider Only Marginal Cash Flows 168 7.7 Capital Budgeting Principle: Don’t Forget the Effects of Taxes—Sally and Dave’s
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Week 5 Case Study Capital Budgeting Case Capital Budgeting Case This week‚ Learning Team C‚ has completed capital budgeting on Corporation A and Corporation B. We were given $250‚000.000 to acquire a corporation. We decided to choose Corporation B. To ensure that our decision was the best‚ this week‚ we defined‚ analyzed‚ and interpreted the Net Present Value and the Internal Rate of Return for both Corporations. We made the decision based on more financial sense. Below‚ we have outlined our
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According to Attrill and Mclaney‚ 2009‚ there are four (4) approaches to capital budgeting. The net present value (NPV) is one of such and is a summation of all discounted cash flows(Present Value) associated with whichever project(s) are undergoing appraisal. Every appraisal method have decision rules‚ examples include the Payback Period(PBP) which stipulates the approval of projects that pays back the initial investments within a specific period. For this method (Net Present Value) to be most
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Chapter 9 Cost of Capital 1. What is the WACC? a. Weighted Average Cost of Capital- most firms employ different types of capital‚ and because of their differences in risk‚ the difference securities have different required rates of return. Typically=debt‚ preferred stock and common equity. 2. What precautions must we take when measuring the WACC to use for capital budgeting decisions (future investment)? b. The company’s current and recent past book and market value structures
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Capital Budgeting: Decision Criteria Brigham and Daves Ch. 12 Christopher B. Alt CFA PhD What Is Capital Budgeting? Analysis of potential additions to fixed assets Long-term decisions typically involving large $ expenditures Making the ‘right’ capital budgeting decisions is enormously important to a firm’s future Should we build this plant? All rights reserved - Christopher B. Alt 2 Key Steps in Capital Budgeting Estimate CFs (inflows & outflows) Assess riskiness of CFs Determine
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