International Financial Capital Budgeting
How do international factors affect decision making? Although the same basic principles of capital budgeting apply to both foreign and domestic operations, there are some key differences. For example, cash flows must be converted into the parent company’s currency, so they are subject to exchange rate risk. In addition, the cost of capital may be different for a foreign project compared with an equivalent domestic project.
For this Assignment, complete Problem 19-17, Parts a, b, and c on page 680 of your course text. This case examines the effects of exchange rates on net present values and rates of return.
FOREIGN CAPITAL BUDGETING Solitaire Machinery is a Swiss multinational manufacturing company. Currently, Solitaire’s financial planners are considering undertaking a 1-year project in the United States. The project’s expected dollar-denominated cash flows consist of an initial investment of $1,000 and a cash inflow the following year of $1,200. Solitaire estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 0.90 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 5%, while similar securities in Switzerland are yielding 3.25%.
In addition to solving for the rates of return from the U.S. and Swiss points of view, write a paragraph that summarizes your key learning points from this case. Be sure to include your calculations as an appendix.
Submit your Application (both your Excel and Word files) by Day 7.
General Guidance on Assignment Length:
Your Assignment, due by Day 7, will typically be 2–3 pages in length as a general expectation/estimate. Refer to the rubric for the Week 7 Assignment for grading elements and criteria. Your Instructor will use the rubric to assess your work.
To submit your Assignment, click on Assignments on the course navigation menu. Locate the Assignment Turnitin – Week 7 link, then click on the View/Complete link, and follow the on-screen instructions for submitting your Assignment.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more