--%>

Performing the capital budgeting analysis

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

E

Expert

Verified

Main goal of financial manager of the parent firm is to increase its shareholders’ wealth. Capital project of the subsidiary of parent may have a positive NPV from the perspective of the subsidiary but yet have a negative NPV from perspective of the parent if particular cash flows may not be repatriated to parent due to remittance restrictions by host country, or if home currency is likely to be appreciated substantially over the life of project, producing the unattractive cash flows when converted into home currency of the parent.  Moreover, higher tax rate within the home country may cause project to become unprofitable from the perspective of the parent.  Any of these many reasons may result within the project being unattractive to the parent and the parent’s stockholders.

   Related Questions in Financial Accounting

  • Q : Find the expected dividend for each of

    Suppose a firm's common stock paid a dividend of $1.75 yesterday. You expect the dividend to grow at the rate of 8% per year for the next 3 years, if you buy the stock, you plan to hold it for 3 years and then sell it.

    Q : Case study of an Operational-Strategy

    Develop a case study of the Operational-Strategy interface as it applies to organisational change (last 3-5 years) within your organisation, together with a project implementation case study .You are required to detail the operational chan

  • Q : What is Bond market What is Bond market

    What is Bond market and how it execute?

  • Q : Historical Cost of Inventory What is

    What is the Historical Cost of Inventory?

  • Q : Accountant & Financial In Business

    Questions 1. Identify the services or programs to be included in the cost and profitability analysis. 2. Examine the costs listed in Table 2. a. Identify the direct costs associated with each service or program. b. Which costs would be organization

  • Q : International bonds Explain why most of

    Explain why most of the international bonds have high Moody’s or Standard & Poor’s credit ratings?

  • Q : Credit Claims How to handle the Credit

    How to handle the Credit Claims?

  • Q : Review the accounting cycle the

    Assignment: The purpose of this assignment is to review the accounting cycle--the procedures that businesses normally use to record transactions during the year and prepare financial statements at the end of the year.  The accounting cycle is discussed in Chapter 3 of your textbook. &nb

  • Q : Define Intangible assets Intangible

    Intangible assets: It is the asset that is not visible however we can feel them. The main examples of these assets are goodwill, patent and trade marks.

  • Q : Benefits of investing through

    List the benefits of investing through the international mutual funds?