This document discusses factors companies consider when making foreign direct investments and the challenges of multi-national capital budgeting. It outlines reasons why companies invest abroad such as accessing new markets and resources. Developing countries offer tax incentives to attract investment. Determining cash flows, taxation, repatriating funds, and differences in capital structures are some difficulties in multi-national budgeting. Risks of foreign investment include economic risks like inflation and political risks like expropriation. Methods for appraising project profitability include payback period, net present value, internal rate of return, and accounting rate of return.
Original Description:
Original Title
For Foreign Investment Decision or Multi-national Capital Bud
This document discusses factors companies consider when making foreign direct investments and the challenges of multi-national capital budgeting. It outlines reasons why companies invest abroad such as accessing new markets and resources. Developing countries offer tax incentives to attract investment. Determining cash flows, taxation, repatriating funds, and differences in capital structures are some difficulties in multi-national budgeting. Risks of foreign investment include economic risks like inflation and political risks like expropriation. Methods for appraising project profitability include payback period, net present value, internal rate of return, and accounting rate of return.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
This document discusses factors companies consider when making foreign direct investments and the challenges of multi-national capital budgeting. It outlines reasons why companies invest abroad such as accessing new markets and resources. Developing countries offer tax incentives to attract investment. Determining cash flows, taxation, repatriating funds, and differences in capital structures are some difficulties in multi-national budgeting. Risks of foreign investment include economic risks like inflation and political risks like expropriation. Methods for appraising project profitability include payback period, net present value, internal rate of return, and accounting rate of return.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
To avail themselves of comparative advantage To diversify risks Local resources in host countries To penetrate into the market To reduce the cost of distribution and transportation To forest all competition To do business To avoid high tariff or non tariff barriers To overcome operational constraints Developing countries offer various types of incentives to attract foreign direct investment. These include benefits of lower tax rates or the definition of the taxable income may offer specific advantages to the investing company. These are known as “TAX HAVENS”
Switzerland, Hong Kong, Kuwait ,the Bahamas Cayman
islands, Liechtenstein and Panama.
MNC’s are frequently charged of using (misusing) tax
havens to minimize their tax liability to host countries. MARKET CHARACTERISTICS AND DIRECT INVESTMENT A high return on the investment Increasing competition Product life cycle approach Exploit monopolistic advantage Following a leader in an oligopolistic market structure
OTHER FACTORS G E has been making direct foreign investment abroad
• To stabilize market rather than engage in cut throat competition
• To diversify holdings • To enforce payments • To meet national aspirations of host countries • Maximize U.S. exports PROBLEMS IN MULTINATIONAL BUDGETING DIFFICULTIES IN THE DETERMINATION OF CASH FLOWS • Joint projects • Economics of scales • Tied-in-scales • Inflationary tendencies • Equipment contribution • Opportunity cost • Transfer pricing • Overhead expenses TAXATION IN THE HOST COUNTRIES REPATRIATION OF FUNDS DIFFERENCE IN CAPITAL STRUCTURES PROJECTS Vs PARENT CASH FLOWS APPRAISING PROJECT PROFITABILITY