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Recommended textbook solutions Principles of Economics8th EditionN. Gregory Mankiw 1,333 solutions Krugman's Economics for AP2nd EditionDavid Anderson, Margaret Ray 1,042 solutions Explorations in Economics1st EditionAlan Krueger 1,281 solutions Essentials of Investments7th EditionAlan J. Marcus, Alex Kane, Zvi Bodie 425 solutions What is the difference between domestic capital budgeting and multinational capital budgeting?In principle, there is little difference between domestic and multinational capital budgeting. From the perspective of the parent firm, project value is still the discounted present value of expected cash flows from the investment discounted at an appropriate risk-adjusted cost of capital.
Why is the capital budgeting for a foreign project more complex than for a domestic project?However, capital budgeting analysis for a foreign project is considerably more complex than the domestic case for a number of reasons: Parent cash flows must be distinguished from project cash flows. Each of these two types of flows contributes to a different view of value.
What are the difficulties involved in multinational capital budgeting?The major risk associated with foreign capital budgeting can be viewed in three ways; exchange rate fluctuation, political risk, and economic instability, specifically related to inflation. These factors can be predominant obstacles in multinational capital budgeting.
Is the most complex method in capital budgeting?The internal rate of return (IRR) method is the most complex of the three. This method compares the return on the asset to the cost of financing the project.
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Why is the multinational capital budgeting process more complex than capital budgeting in a domestic environment?
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