文档介绍：Chapter 15 Cross-Border Capital Budgeting
The Algebra of Cross-Border
Investment Analysis
An Example: Wendy’s Restaurant in Neverland
The Parent versus Local Perspective on Project Valuation
Special Circumstances in Cross-Border Investments
Summary
“Domestic” NPV calculations NPV0 = St E[CFt ] / (1+i )t
1. Estimate future cash flows E[CFt]
Include only incremental cash flows
Include all opportunity costs
“Domestic” NPV calculations NPV0 = St E[CFt ] / (1+i )t
1. Estimate future cash flows E[CFt]
2. Identify a risk-adjusted discount rate
Discount nominal CFs at nominal discount rates and real CFs at real discount rates
Discount equity CFs at equity discount rates and debt CFs at debt discount rates
Discount CFs to debt and equity at the
Discount cash flows in a particular currency at a discount rate in that currency
“Domestic” NPV calculations NPV0 = St E[CFt ] / (1+i )t
1. Estimate future cash flows E[CFt]
2. Identify risk-adjusted discount rates
3. Calculate NPV0
Based on expected future cash flows and the appropriate risk-adjusted discount rate
Cross-border capital budgeting
Foreign projects generate foreign currency cash flows.
Recipe 1
Discount in the foreign currency and convert the foreign currency NPV to a domestic currency value at the spot exchange rate.
Recipe 2
Convert foreign cash flows into the domestic currency at expected future spot rates and then discount in the domestic currency.
Recipe 1 Discount in the foreign currency
1. Estimate CFtf
2. Identify if
3. Calculate NPV0d
Calculate NPV0f = St E[CFtf ] / (1+if )t
Convert to NPV0d
CF1f
CF2f
if
NPV0f
NPV0d = S0d/f NPV0f
Recipe 2 Discount in the domestic currency
1. Estimate CFtd = Ftd/f E[CFtf ]
2. Identify id
3. Calculate NPV0d
id
NPV0d
CFtd = Ftd/f E[CFtf ]
CF1f
CF2f
Equivalence of the two recipes
Recipe 2: Discount in the domestic currency
NPV0d = St E[CFtd ] / (1+id )t
with E[CFtd ] = Ftd/f E[CFtf ] …from forward parity
NPV0d