Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- 1 Capital budgeting: an overview
- 2 Project cash flows
- 3 Forecasting cash flows: quantitative techniques and routes
- 4 Forecasting cash flows: qualitative or judgemental techniques
- 5 Essential formulae in project appraisal
- 6 Project analysis under certainty
- 7 Project analysis under risk
- 8 Sensitivity and break-even analysis
- 9 Simulation concepts and methods
- 10 Case study in financial modelling and simulation of a forestry investment
- 11 Resource constraints and linear programming
- 12 More advanced linear programming concepts and methods
- 13 Financial modelling case study in forestry project evaluation
- 14 Property investment analysis
- 15 Forecasting and analysing risks in property investments
- 16 Multinational corporations and international project appraisal
- References
- Index
16 - Multinational corporations and international project appraisal
Published online by Cambridge University Press: 14 May 2010
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- 1 Capital budgeting: an overview
- 2 Project cash flows
- 3 Forecasting cash flows: quantitative techniques and routes
- 4 Forecasting cash flows: qualitative or judgemental techniques
- 5 Essential formulae in project appraisal
- 6 Project analysis under certainty
- 7 Project analysis under risk
- 8 Sensitivity and break-even analysis
- 9 Simulation concepts and methods
- 10 Case study in financial modelling and simulation of a forestry investment
- 11 Resource constraints and linear programming
- 12 More advanced linear programming concepts and methods
- 13 Financial modelling case study in forestry project evaluation
- 14 Property investment analysis
- 15 Forecasting and analysing risks in property investments
- 16 Multinational corporations and international project appraisal
- References
- Index
Summary
So far in this book, investment projects have been analysed on the understanding that they were domiciled completely within a single country. This approach has allowed the discussion to proceed in the absence of the extra layer of analysis that is required when investments are located outside a firm's home country. In this chapter, we will relax this assumption and investigate the situation where a firm is considering investing in a project in another country.
Multinational corporations (MNC) frequently invest in foreign countries through their subsidiaries established in those foreign countries (also called ‘host countries’). These subsidiaries may be viewed as the MNCs' ‘investment arms’, or ‘business arms’, in host countries.
Multinational corporations' foreign investment analysis is complicated by a variety of factors and risks that are not encountered by purely domestic firms or purely national investments. These complicating factors and risks stem from:
involvement of more than one company – the existence of parent and subsidiary
involvement of more than one country – home (or parent's) country and host (or foreign or subsidiary's) country
tax differentials between home and host countries
requirement to convert funds from one currency to another currency and the associated risks due to unpredictable exchange rate movements
country risk: the host country's political, social, economic and financial risk factors.
The basic concepts, principles and techniques of project analysis still apply to multinational corporations' foreign investments.
- Type
- Chapter
- Information
- Capital BudgetingFinancial Appraisal of Investment Projects, pp. 297 - 312Publisher: Cambridge University PressPrint publication year: 2002