CHAPTER 12

Capital Budgeting for the Multinational Firms

The Present Chapter

It discusses the capital investment practices at the international level.

Introduction

Foreign-exchange rates, interest rates, and inflation are three external factors that affect multinational companies (MNCs) and their markets. They are particularly useful for evaluating international capital budgeting decisions. Foreign-exchange rates have the most significant effect on the capital budgeting process. A foreign investment project will be affected by exchange rate fluctuations during the life of the project. But, these fluctuations are difficult to forecast. Therefore, correct hedging methods need to be used to incorporate these changes. The cost of capital is used ...

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