Explain performing the capital budgeting analysis, Financial Management

Assignment Help:

Explain the difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the project perspective.

The aim of the financial manager of the parent firm is to maximize its wealth of shareholders. A capital project of a subsidiary of the parent may comprise a positive NPV (or APV) from the subsidiary’s perspective yet comprise a negative NPV (or APV) from the parent’s perspective if fixed cash flows cannot be repatriated to the parent due to remittance restrictions by the host country, or if the home currency is supposed to appreciate substantially over the life of the project, yielding unattractive cash flows while converted into the home currency of the parent.  In addition, a higher tax rate in the home country may cause the project to be unbeneficial from the parent’s perspective.  Any of these causes could result in the project being unattractive to the parent and the parent’s stockholders.


Related Discussions:- Explain performing the capital budgeting analysis

WACC, WHY ORDINARY SHARES DIFFER IN DIFFERENT COMPANIES

WHY ORDINARY SHARES DIFFER IN DIFFERENT COMPANIES

Describe the characteristics of money markets, Question: (a) Consider t...

Question: (a) Consider that rate of interest is 10% and you are offered either a discount bond paying you $5,000 in 5 years or a fixed-payment loan paying you $750 per year for

International markets, Explain the random walk model for exchange rate fore...

Explain the random walk model for exchange rate forecasting. Can it be consistent with technical analysis?

Declaration of auction results, Typically, there exist two type...

Typically, there exist two types of bids in the treasury auction process. They are: Competitive bid and non-competitive bid. A non-competitiv

Minimum value, The minimum value is the lower limit for the market va...

The minimum value is the lower limit for the market value of a convertible bond. It is equal to the greater of the conversion value and the straight value. We can

Put provision, An issue with a put provision included in the ag...

An issue with a put provision included in the agreement grants the bondholder the right to sell bonds back to the issuer at a pre-specified rate

Convertible bonds, Basics of Convertible Bonds The provision of convers...

Basics of Convertible Bonds The provision of conversion in a corporate bond entitles the bondholder the right to convert the bond into a predetermined number of shares of commo

Calculate amount to fund the endowment, On Completion of her introductory f...

On Completion of her introductory finance course, Kieran was so pleased with the amount of useful and interesting knowledge she gained that she convinced her parents, who were weal

Describe the term- investment decision, Describe the term- Investment Decis...

Describe the term- Investment Decision Investment decision, also referred to as the capitalbudgeting decision, simply means decisions to acquire assets or to invest in aproj

Event study, Event studies are one of the most powerful and widely used app...

Event studies are one of the most powerful and widely used applications of the capital asset pricing model (CAPM). An event study is an attempt to determine whether a particular ev

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd