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Capital Budgeting: Financial Appraisal of Investment Projects

Don Dayananda, Richard Irons, Steve Harrison, John Herbohn, Patrick Rowland

Chapter 16

Multinational corporations and international project appraisal - all with Video Answers

Educators


Chapter Questions

Problem 1

Define the following terms:
$\bullet$ international investment
$\bullet$ multinational corporation
$\bullet$ home country
$\bullet$ host country
$\bullet$ exchange rate risk
$\bullet$ political risk
$\bullet$ expropriation
$\bullet$ transaction exposure

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01:39

Problem 2

What are the benefits of international investment for the two main parties involved, the MNC and the host country.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator

Problem 3

Explain why the host country as an entity is recognized as a party to international investment, whilst the home country is not.

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01:08

Problem 4

By performing simulation experiments with alternative combinations of parameter values and introducing new variables (or conditions) to Example 16.1, establish a mix of cash flows to Lekano and Durango which would result in a positive NPV for both parties. In your experiments, possible compensation payments to Lekano by the Sri Lankan government and US government tax exemption for Durango may be considered.

Sheryl Ezze
Sheryl Ezze
Numerade Educator

Problem 5

Assume that Lekano in Example 16.1 can raise SLRs. 600 million of the required initial SLRs. 800 million from the country's national provident fund as a loan at $11 \%$ per annum. Explain how this new financing arrangement would affect the calculated NPV results, and discuss how Lekano's transaction exposure to possible Sri Lankan rupee depreciation would be reduced.

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Problem 6

Explain how both the RADR and the CE approaches might be employed to assess a project under an international risk scenario.

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