Professional Documents
Culture Documents
Management
Alan Shapiro
7th Edition
Power Points by
J.Wiley & Sons
CHAPTER 17
CAPITAL
BUDGETING FOR
THE
MULTINATIONAL
CHAPTER OVERVIEW:
I. BASIS OF CAPITAL BUDGETING
II. ISSUES IN FOREIGN INVESTMENT
ANALYSIS
III. POLITICAL RISK ANALYSIS
IV. GROWTH OPTIONS AND PROJECT
EVALUATION
I.BASICS OF CAPITAL
BUDGETING
I. BASICS OF CAPITAL BUDGETING
A. Basic Criterion: Net Present Value
B. Net Present Value Technique:
1. Definition
The present value of future
cash
flows, discounted at
the projects
cost of capital
less the initial net
cash outlay.
4
Xt
NPV I 0
t
(
1
k
)
t 1
where I0 = initial cash outlay
xt= net cash flow at t
k = cost of capital
n = investment horizon
5
Global
Global
= corporate flow
cash flow
without
with project
project
8
12
Tax Factors:
determine the amount and
timing
of taxes paid on foreign-source
income.
13
14
EXPROPRIATION
- the extreme form of political
risk
C.
BLOCKED FUNDS
17
18