国际财务管理(英文课件)Chap17-International-Capital-Budgeting.ppt

1、国际财务管理(英文课件）Chap17 International Capital Budgeting17-1Chapter OutlinelReview of Domestic Capital BudgetinglThe Adjusted Present Value ModellCapital Budgeting from the Parent Firms PerspectivelRisk Adjustment in the Capital Budgeting ProcesslSensitivity AnalysislReal Options17-21.Identify the SIZE an

2、d TIMING of all relevant cash flows on a time line.2.Identify the RISKINESS of the cash flows to determine the appropriate discount rate.3.Find NPV by discounting the cash flows at the appropriate discount rate.4.Compare the value of competing cash flow streams at the same point in time.Review of Do

3、mestic Capital Budgeting17-3Review of Domestic Capital BudgetingThe basic net present value equation is01)1()1(CKTVKCFNPVTTTtttWhere:CFt=expected incremental after-tax cash flow in year t,TVT=expected after tax cash flow in year T,including return of net working capital,C0=initial investment at ince

4、ption,K=weighted average cost of capital.T=economic life of the project in years.17-4Review of Domestic Capital BudgetingThe NPV rule is to accept a project if NPV 00)1()1(01CKTVKCFNPVTTTtttand to reject a project if NPV 0.0)1()1(01CKTVKCFNPVTTTttt17-5Review of Domestic Capital BudgetingFor our purp

5、oses it is necessary to expand the NPV equation.)1()1)(IDIDOCRCFtttttttRt is incremental revenueCt is incremental operating cash flow Dt is incremental depreciationIt is incremental interest expense is the marginal tax rate 17-6Review of Domestic Capital BudgetingFor our purposes it is necessary to

6、expand the NPV equation.)1()1)(IDIDOCRCFttttttt)1(IDNIttttttDDOCR)1)(ttDNOI)1(tttDOCR)1)(ttDOCF)1(17-7Review of Domestic Capital BudgetingWe can usetttDOCFCF)1(01)1()1(CKTVKCFNPVTTTtttto restate the NPV equation01)1()1()1(CKTVKDOCFNPVTTTttttas:17-8The Adjusted Present Value ModelCan be converted to

7、adjusted present value(APV)01)1()1()1()1(CKTVKDKOCFNPVTTttTtttBy appealing to Modigliani and Millers results.01)1()1()1()1()1(CKTViIiDKOCFAPVTuTttttTttut17-9The Adjusted Present Value ModelThe APV model is a value additivity approach to capital budgeting.Each cash flow that is a source of value to t

8、he firm is considered individually.Note that with the APV model,each cash flow is discounted at a rate that is appropriate to the riskiness of the cash flow.01)1()1()1()1()1(CKTViIiDKOCFAPVTuTttttTttut17-10Capital Budgeting from the Parent Firms PerspectivelDonald Lessard developed an APV model for

9、a MNC analyzing a foreign capital expenditure.The model recognizes many of the particulars peculiar to foreign direct investment.TttdttTudTTTttdttTttdttTttudttiLPSCLSRFSCSKTVSiISiDSKOCFSAPV1000000111)1()1()1()1()1()1(17-11Capital Budgeting from the Parent Firms PerspectiveThe operating cash flows mu

10、st be translated back into the parent firms currency at the spot rate expected to prevail in each period.TttdttTudTTTttdttTttdttTttudttiLPSCLSRFSCSKTVSiISiDSKOCFSAPV1000000111)1()1()1()1()1()1(The operating cash flows must be discounted at the unlevered domestic rate17-12Capital Budgeting from the P

11、arent Firms Perspective OCFt represents only the portion of operating cash flows available for remittance that can be legally remitted to the parent firm.TttdttTudTTTttdttTttdttTttudttiLPSCLSRFSCSKTVSiISiDSKOCFSAPV1000000111)1()1()1()1()1()1(The marginal corporate tax rate,is the larger of the paren

12、ts or foreign subsidiarys.17-13Capital Budgeting from the Parent Firms Perspective S0RF0 represents the value of accumulated restricted funds(in the amount of RF0)that are freed up by the project.TttdttTudTTTttdttTttdttTttudttiLPSCLSRFSCSKTVSiISiDSKOCFSAPV1000000111)1()1()1()1()1()1(Denotes the pres

13、ent value(in the parents currency)of any concessionary loans,CL0,and loan payments,LPt,discounted at id.17-14Estimating the Future Expected Exchange RatesWe can appeal to PPP:tftdtSS)1()1(017-15A recipe for international decision makers:1.Estimate future cash flows in foreign currency.2.Convert to U

14、.S.dollars at the predicted exchange rate.3.Calculate APV using the U.S.cost of capital.International Capital BudgetingExample 600 200 500 300 0 1 year 2 years 3 years17-16FactsInternational Capital Budgeting%6%15$iIs this a good investment from the perspective of the U.S.shareholders?600 200 500 30

15、0 0 1 year 2 years 3 years =3%S0($/)=$.5526517-17ESt($/)can be found by appealing to the interest rate differential:ES1($/)=(1.06/1.03)S0($/)International Capital BudgetingCF0=(600)S0($/)=(600)($.5526/)=$331.6 =(1.06/1.03)($.5526/)=$.5687/so CF1=(200)($.5687/)=$113.7CF2=(1.06)2/(1.03)2 S0($/)(500)=$

16、292.6APV=-$331.60+$113.7/(1.15)+$292.6/(1.15)2+$180.7/(1.15)3 =$107.3 0 so accept.CF1=(200)ESt($/)Similarly,SolutionCF3=(1.06)3/(1.03)3 S0($/)(300)=$180.717-18Risk Adjustment in the Capital Budgeting ProcesslClearly risk and return are correlated.lPolitical risk may exist along side of business risk

17、,necessitating an adjustment in the discount rate.17-19Sensitivity AnalysislIn the APV model,each cash flow has a probability distribution associated with it.lHence,the realized value may be different from what was expected.lIn sensitivity analysis,different estimates are used for expected inflation

18、 rates,cost and pricing estimates,and other inputs for the APV to give the manager a more complete picture of the planned capital investment.17-20Real OptionslThe application of options pricing theory to the evaluation of investment options in real projects is known as real options.nA timing option is an option on when to make the investment.nA growth option is an option to increase the scale of the investment.nA suspension option is an option to temporarily cease production.nAn abandonment option is an option to quit the investment early.17-21End Chapter Seventeen