《国际金融管理International Financial Management》双语课件-12 Multinational Capital Budgeting.ppt

1、,Multinational Capital Budgeting,12,Chapter,South-Western/Thomson Learning 2003,See c14.xls for spreadsheets to accompany this chapter.,Chapter Objectives,To compare the capital budgeting analysis of an MNCs subsidiary with that of its parent; To demonstrate how multinational capital budgeting can b

2、e applied to determine whether an international project should be implemented; and To explain how the risk of international projects can be assessed.,Subsidiary versus Parent Perspective,Should the capital budgeting for a multi-national project be conducted from the viewpoint of the subsidiary that

3、will administer the project, or the parent that will provide most of the financing? The results may vary with the perspective taken because the net after-tax cash inflows to the parent can differ substantially from those to the subsidiary.,Subsidiary versus Parent Perspective,The difference in cash

4、inflows is due to : Tax differentials What is the tax rate on remitted funds? Regulations that restrict remittances Excessive remittances The parent may charge its subsidiary very high administrative fees. Exchange rate movements,Online Application,For country-specific information such as general bu

5、siness rules, regulations and tax rates, visit: the Price Waterhouse Coopers site at , the Yahoo! International Finance Center at ,Remitting Subsidiary Earnings to the Parent,A parents perspective is appropriate when evaluating a project, since any project that can create a positive net present valu

6、e for the parent should enhance the firms value. However, one exception to this rule may occur when the foreign subsidiary is not wholly owned by the parent.,Subsidiary versus Parent Perspective,Input for MultinationalCapital Budgeting,The following forecasts are usually required: 1.Initial investme

7、nt 2.Consumer demand 3.Product price 4.Variable cost 5.Fixed cost 6.Project lifetime 7.Salvage (liquidation) value,The following forecasts are usually required:,Input for MultinationalCapital Budgeting,9.Tax laws 10.Exchange rates 11.Required rate of return,8.Fund-transfer restrictions,What is the e

8、xpected economic growth rate for a particular country?,Online Application,Consult the Country Commercial Guides prepared by embassy staff at /website/ccg.nsf/ccghomepage?openform.,Refer to the CIAs World Factbook at /.,MultinationalCapital Budgeting,Capital bu

9、dgeting is necessary for all long-term projects that deserve consideration. One common method of performing the analysis is to estimate the cash flows and salvage value to be received by the parent, and compute the net present value (NPV) of the project.,MultinationalCapital Budgeting,NPV= initial o

10、utlay n + S cash flow in period t t =1 (1 + k )t + salvage value (1 + k )n k = the required rate of return on the project n = project lifetime in terms of periods If NPV 0, the project can be accepted.,Multinational capital budgeting example,Spartan, Inc., is considering the development of a subsidi

11、ary in Singapore that would manufacture and sell tennis rackets locally. Spartans management has asked various departments to supply relevant information for a capital budgeting analysis. In addition, some Spartan executives have met with government officials in Singapore to discuss the proposed sub

12、sidiary. All relevant information follows:,1. Initial investment. An estimated 20 million Singapore dollars, which includes funds to support working capital, would be needed for the project. Given the existing spot rate of $.50 per Singapore dollar, the U.S. dollar amount of the parents initial inve

13、stment is $10 million. 2. Project life. The project is expected to end in four years. The host government of Singapore has promised to purchase the plant from the parent after four years.,3. price and demand. The estimated price and demand schedules during each of the next four years are shown here:

14、 Year price per racket demand in Singapore 1 S$350 60,000 units 2 S$350 60,000 units 3 S$360 100,000 units 4 S$380 100,000 units 4. Costs. The variable costs (for materials, labor, etc.) per units estimated and consolidated as shown here: Year variable costs (V) per racket 1 S$200 2 S$200 3 S$250 4

15、S$260,The expense of leasing extra office space is S$1 million per year. Other annual overhead expenses are expected to be S$1 million per year. 5.Exchange rates. The spot rate of the Singapore dollar is $.50. Spartan uses the spot rate as its best forecast of the exchange rate that will exist in fu

16、ture periods. Thus, the forecasted exchange rate for all future periods is $.50. 6. Host country taxes on income eared by subsidiary. The Singapore government will allow Spartan to establish the subsidiary and will impose a 20 percent tax rate on income. In addition, it will impose a 10 percent with

17、holding tax on any funds remitted by the subsidiary to the parent.2,7. U.S. government taxes on income earned by Spartan subsidiary. The U.S. government will allow a tax credit on taxes paid in Singapore; therefore, earnings remitted to the U.S. parent will not be taxed by the U.S. government. 8. Ca

18、sh flows from Spartan subsidiary to parent. The Spartan subsidiary plans to send all net cash flows received back to the parent firm at the end of each year. The Singapore government promises no restrictions on the cash flows to be sent back to the parent firm but does impose a 10 percent withholdin

19、g tax on any funds sent to the parent.,9. depreciation. The Singapore government will allow Spartans subsidiary to depreciate the cost of the plant and equipment at a maximum rate of S$2 million per year, which is the rate the subsidiary will use. 10. Salvage value. The Singapore government will pay

20、 the parent S$12 million to assume ownership of the subsidiary at the end of four years. Assume that there is no capital gains tax on the sale of the subsidiary. 11. Required rate of return. Spartan requires a 15 percent return on this project.,Capital Budgeting Analysis,Period 4 1.Demand100,000 2.P

21、rice per unitS$380 3.Total revenueS$38,000,000 4.Variable cost per unitS$260 5.Total variable cost S$26,000,000 6.Annual lease expenseS$1,000,000 7.Other fixed periodic expensesS$1,000,000 8.Noncash expense (depreciation)S$2,000,000 9.Total expensesS$30,000,000 10.Before-tax earnings of subsidiaryS$

22、8,000,000 11.Host government tax (20%)S$1,600,000 12.After-tax earnings of subsidiaryS$6,400,000,Capital Budgeting Analysis,Period 4 13.Net cash flow to subsidiaryS$8,400,000 14.Remittance to parent (100%)S$8,400,000 15.Tax on remitted funds(10 %) S$840,000 16.Remittance after withheld taxS$7,560,00

23、0 17.Salvage valueS$12,000,000 18.Exchange rate$.50 19.Cash flow to parent$9,780,000 20.initial investment by parent0 21.Net cash flow to parent$9,780,000 22.PV of net cash flow to parent (15%)$5,591,747 23.Cumulative NPV$2,229,867,Factors to Consider in Multinational Capital Budgeting,Exchange rate

24、 fluctuations. Different scenarios should be considered together with their probability of occurrence. Inflation. Although price/cost forecasting implicitly considers inflation, inflation can be quite volatile from year to year for some countries.,Analysis using exchange rate scenarios: Spartan, Inc

25、.,Analysis using exchange rate scenarios: Spartan, Inc.,汇率波动的敏感性分析,Factors to Consider in Multinational Capital Budgeting,Financing arrangement. Financing costs are usually captured by the discount rate. However, many foreign projects are partially financed by foreign subsidiaries. Blocked funds. So

26、me countries may require that the earnings be reinvested locally for a certain period of time before they can be remitted to the parent.,Financing Arrangement: Spartan, Inc.,Period 4 1.Demand100,000 2.Price per unitS$380 3.Total revenueS$38,000,000 4.Variable cost per unitS$260 5.Total variable cost

27、 S$26,000,000 6.Annual lease expense0 7.Other fixed periodic expensesS$1,000,000 8.Noncash expense (depreciation)S$2,000,000 9.Total expensesS$29,000,000 10.Before-tax earnings of subsidiaryS$9,000,000 11.Host government tax (20%)S$1,800,000 12.After-tax earnings of subsidiaryS$7,200,000,Financing A

28、rrangement: Spartan, Inc.,Period 4 13.Net cash flow to subsidiaryS$9,200,000 14.Remittance to parent (100%)S$9,200,000 15.Tax on remitted funds(10 %) S$920,000 16.Remittance after withheld taxS$8,280,000 17.Salvage valueS$22,000,000 18.Exchange rate$.50 19.Cash flow to parent$15,140,000 20. PV of ne

29、t cash flow to parent (15%) $8,656,344 21.Initial investment by parent0 22.Cumulative NPV$1,116,425,Factors to Consider in Multinational Capital Budgeting,Uncertain salvage value. The salvage value typically has a significant impact on the projects NPV, and the MNC may want to compute the break-even

30、 salvage value. Impact of project on prevailing cash flows. The new investment may compete with the existing business for the same customers. Host government incentives. These should also be considered in the analysis.,净现值为零时残值的计算,NPV=-IO +CFt/(1+k)t+SVn/(1+k)n 0 = -IO +CFt/(1+k)t+SVn/(1+k)n IO- CFt

31、/(1+k)t = SVn/(1+k)n IO- CFt/(1+k)t(1+k)n = SVn,残值盈亏平衡点估算举例,假定Spartan公司并未得到关于子公司最终出售残值价格的保证，该项目残值盈亏平衡点可通过如下计算（第一张表）： 1、估算未来现金流量现值（扣除项目残值）； 2、减去初期支出的贴现现金流量； 3、乘以（1k）n。,残值盈亏平衡点估算举例（续）,NPV2700000/(1+15%)2700000/(1+15%)23420000/(1+15%)33780000/(1+15%)4 8799347 SVn IO- CFt/(1+k)t(1+k)n （100000008799347）1

32、.154 2099950,Adjusting Project Assessmentfor Risk,If an MNC is unsure of the cash flows of a proposed project, it needs to adjust its assessment for this risk. One method is to use a risk-adjusted discount rate. The greater the uncertainty, the larger the discount rate that is applied. Many computer

33、 software packages are also available to perform sensitivity analysis and simulation.,案例分析,在进行国际投资决策时，有两种计算净现值的方法可参考： 方法一：1、按外币估计未来现金流量；2、按预计汇率将外币现金流量换算为本币现金流量；3、用本币贴现率计算项目净现值。 方法二：1、按外币估计未来现金流量；2、用外币贴现率计算项目净现值；3、用即期汇率将外币净现值变换为本币净现值。,案例,美国奥特兰大钢铁公司打算在荷兰将一座分厂。这一投资项目期望能产生如下现金流量：,问题,如果奥特兰大公司期望该项目有16的美元报酬率，那么所产生的荷兰盾现金流量今天应值多少美元？ 解答： 按方法一，先通过新闻媒体找出美国的无风险利率为8，而荷兰盾为9，假如所预期的真实利率两国是一致的，那么相应地所预期的通货膨胀率也应该是荷兰