Pplication: International Financial Capital Budgeting

Application: International Financial Capital Budgeting

How do international factors affect decision making? Although the same basic principles of capital budgeting apply to both foreign and domestic operations, there are some key differences. For example, cash flows must be converted into the parent companys currency, so they are subject to exchange rate risk. In addition, the cost of capital may be different for a foreign project compared with an equivalent domestic project.

For this Assignment, complete Problem 19-17, Parts a, b, and c on page 674 of your course text. This case examines the effects of exchange rates on net present values and rates of return. (ATTACHED DOCUMENT)

In addition to solving for the rates of return from the U.S. and Swiss points of view, write a paragraph that summarizes your key learning points from this case. Be sure to include your calculations as an appendix.

Submit your Application (both your Excel and Word files) by Day 7. PLEASE MAKE SURE YOU UPLOAD TWO FILES ONE EXCEL AND ONE WORD

General Guidance on Assignment Length:

Your Assignment, due by Day 7, will typically be 2a 3 pages in length as a general expectation/estimate. Refer to the rubric for the Week 7 Assignment for grading elements and criteria. Your Instructor will use the rubric to assess your work.

Brigham, E., & Houston, J. (2013). Fundamentals of financial management (13th ed.). Mason, OH: Cengage Learning.

Chapter 19, Multinational Financial Management(pp. 642a 675)

In Chapter 19, the authors explain the key differences between multinational and domestic corporations, as well as the impact these differences have on the financial management of multinational businesses.

Javidan, M., Teagarden, M., & Bowen, D. (2010). Making it overseas. Harvard Business Review, 88, 109a 113.
Retrieved from the Walden Library databases.

This article presents two scenarios in which executives are employed overseas and focuses on the characteristics and skills needed to be an effective manager in a foreign country.

Moeller, M., Harvey, M., Griffith, D., & Richey, G. (2013). The impact of country-of-origin on the acceptance of foreign subsidiaries in host countries: An examination of the liability-of-foreignness. International Business Review, 22, 89a 99.
Retrieved from the Walden Library databases.

This article examines the relationship between an organizations country-of-origin and acceptance into a host country environment by constituents, such as vendors, suppliers, and distributors. It points out that management must note the potential resistance to accept the organization and its products/services and that management must develop a proactive set of strategies to address the negativism of the host country constituents.

Quer, D., Claver, E., & Rienda, L. (2012). Political risk, cultural distance, and outward foreign direct investment: Empirical evidence from large Chinese firms.Asia Pacific Journal of Management, 29(4), 1089a 1104. doi:s10490-011-9247-7
Retrieved from the Walden Library databases.

This article analyzes the influence of political risk and cultural distance on the location patterns of large Chinese companies. Results show that high political risk in the host country does not discourage Chinese multinationals.

Tolstoy, D. (2014). Differentiation in foreign business relationships: A study on small and medium-sized enterprises after their initial foreign market entry. International Small Business Journal, 32, 17a 35.

Mathur, A., & Singh, K. (2013). Foreign direct investment, corruption, and democracy. Applied Economics, 45, 991a 1002.