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International Financial Management 11th Edition by Jeff Madura 1 © 2012 Cengage Learning.All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14 Multinational Capital Budgeting Chapter Objectives Compare the capital budgeting analysis of an MNC’s subsidiary versus its parent Demonstrate how multinational capital building can be applied to determine whether an international project should be implemented Show how multinational capital budgeting can be adapted to account for special situations such as alternative exchange rate scenarios or when subsidiary financing is considered Explain how the risk of international projects can be assessed 2 © 2012 Cengage Learning.All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Subsidiary versus Parent Perspective 1. Tax Differentials: different tax rates may make a project feasible from a subsidiary’s perspective, but not from a parent’s perspective. 2. Restrictions on Remitted Earnings: governments may place restrictions on whether earnings must remain in country. 3. Excessive Remittances: if the parent company charges fees to the subsidiary, then a project may appear favorable from a parent perspective, but not from a subsidiary’s perspective. 4. Exchange Rate Movements: earnings converted to the currency of the parent company will be affected by exchange rate movements. © 2012 Cengage Learning.All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Exhibit 14.1 Process of Remitting Subsidiary Earnings to Parent 4 © 2012 Cengage Learning.All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Subsidiary versus Parent Perspective 1. The parent’s perspective is appropriate when evaluating a project since the parent’s shareholders are the owners and any project should generate sufficient cash flows to the parent to enhance shareholder wealth. 2. One exception is when the foreign subsidiary is not wholly owned by the parent and the foreign project is partially financed with retained earnings of the parent and of the subsidiary. © 2012 Cengage Learning.All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. ... - tailieumienphi.vn
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