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CAPITAL BUDGETING FOR INTERNATIONAL PROJECT INVESTMENT DECISIONS
What is the primary objective of capital budgeting for international project investment decisions?
The primary objective is to evaluate and select long-term investment projects in foreign countries that maximise the firm's value, considering cash flows, risk, and the cost of capital across different currencies and regulatory environments.
What is the net present value (NPV) method used for in international capital budgeting?
To evaluate if a foreign project creates shareholder value.
How does the Adjusted Present Value (APV) method differ from the traditional NPV method in international capital budgeting?
APV separates the base-case NPV (as if all-equity financed) from the present value of financing side effects such as tax shields, subsidised loans, and issue costs, making it more transparent for cross-border projects where financing structures are complex.
What is repatriation risk in international project investment?
Risk that host country restricts profit or fund transfers to parent.
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