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Determinants of the Cost of International Projects & Their Management by Rajat Jhingan

Determinants of the Cost of International Projects & Their Management by Rajat Jhingan

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Published by: Rajat Jhingan on Sep 25, 2011
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Determinants of the costofInternational Projects&their Management
 by Rajat Jhingan
PGDM FT (08-10)
Capital Budgeting
Capital budgeting requires estimation of a project’s
incremental cash flows - which are determined byestimating worldwide cash flows with and without theproject.
There are two main methods of international capitalbudgeting, centralized and decentralized
Centralized requires exchange rate forecasts
Decentralized requires a local-currency cost of capital.
The method a firm selects should depend on itscomparative advantage in estimating each
By: Rajat Jhingan
International Project : Objectives
Shareholders’ wealth is created when – 
return in thePresent Value is more than Investment Cost
Firm that could source funds internationally ratherdomestically will have lower cost of capital.
Greater Opportunities to raise funds
Positive NPVs
APV Model given by Donald Lessard (1985)
By: Rajat Jhingan

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