(The assessment will cover the capital investment appraisal including tax, which reporting currency to use and which exchange rate, and why the cost of capital/discount rate used was selected)
Part three of the assessment consists of producing a Net Present Value (NPV) investment appraisal of your project. You will need to establish estimate cash flows, estimate the outlay/investment required, and use your cost of capital calculated within part two of the assessment to discount the cash flows. You should ensure that your NPV fully reflects the international complexities associated with your proposed project, particularly any tax and transfer pricing implications, and that your evaluation explains clearly decisions regarding the exchange rates used.
Your submission for part three of the assessment should therefore include:
· A discounted NPV which clearly shows the cash flows estimated and how the international complexities have been incorporated
· An evaluation and explanation of how the cash flows have been established, the international complexities incorporated and any assumptions made
* Essential sources *
McRae (1996) International Business Finance. Chapter 9 [financing and insuring exports]
Shapiro (2005) Foundations of Multinational Financial Management. 5th ed. Chapter 14 [the cost of capital for foreign investments]
Arnold (2005) Corporate financial management. 3rd ed. Chapter 35 [managing exchange-rate risk]
Buckley (2004) Multinational Finance. 5th ed. Chapter 13 [external techniques of exposure management]
Eiteman (2010) Multinational Business Finance. 12th ed.
Demirag & Goddard (1994) Financial Management for International Business