Professional Documents
Culture Documents
Chapter 16
Chapter 16
• Ownership of 10-25%
• United States, Japan and Australia: 10%
• France, Germany and United Kingdom: higher
threshold
• Belgium and the Netherlands: no specific number
• Profitability
• Opportunities for market growth
• Production cost levels
• Economies of scale
• Greenfield investment
• Brownfield investment
• Mergers and acquisitions
• Joint ventures
(cont.)
Copyright 2010 McGraw-Hill Australia Pty Ltd
PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa
Slides prepared by Afaf Moosa
16-11
Choice between greenfield investment and M&As
(cont.)
• Multinationals with subsidiaries prefer acquisitions.
• The tendency for M&As depends on the supply of
target firms
• Slow growth in an industry encourages M&As
(cont.)
Copyright 2010 McGraw-Hill Australia Pty Ltd
PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa
Slides prepared by Afaf Moosa
16-29
Strategic and long-term factors (cont.)
Ct n
NPV C0 t
t 1 (1 r )
E E D D
r r r
E D E D
Ctn
C0 t
0
t 1 (1 r )
• Two problems:
(i) Measurement of cash flows
(ii) Choice of discount rate
(cont.)
Copyright 2010 McGraw-Hill Australia Pty Ltd
PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa
Slides prepared by Afaf Moosa
16-39
Forecasting cash flows (cont.)
• Salvage value
• Remittance restrictions
• Tax rates and laws
• Exchange rates
• Tax considerations
• Global regulation
• Management incentives and performance evaluation
• Marketing considerations and competition
(cont.)
Copyright 2010 McGraw-Hill Australia Pty Ltd
PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa
Slides prepared by Afaf Moosa
16-56
Setting transfer prices (cont.)