Questions and Answers on International Capital Budgeting Essays

Questions and Answers on International Capital Budgeting Essays Questions and Answers on International Capital Budgeting Paper Questions and Answers on International Capital Budgeting Paper 1. Why should the required rate of return for a capital budgeting problem be project specific? Doesn’t the firm just have to satisfy an overall cost-of-capital requirement? Answer: The required rate of return for a capital budgeting problem is project specific because the firm is viewed as a portfolio of projects owned by the shareholders. It is the shareholder’s perspective that matters, and it is their opportunity cost that gives the required rate of return for a project. The question that the managers should ask is the following: If the shareholders were to receive the cash flows from the project directly, what risk would they associate with the cash flows? Notice that this immediately suggests that the required rate of return should be project specific and that it should reflect the market risk that continues to be present when an investor holds a large, well-diversified portfolio. 2. What is the conceptual foundation of the flow-to-equity approach to capital budgeting? Answer: In the flow-to-equity approach to capital budgeting, the after-tax cash flows that are available to be paid to equity holders are discounted at the levered equity required rate of return. Hence, the interest costs of debt are subtracted from the earnings of the firm in considering the amount of tax the firm will owe, and the interest payments that the firm must make are taken out of the residual free cash flow. The discount rate for these levered equity flows therefore must reflect the fact that equity is a residual claimant on the cash flows of the firm. 3. What is the weighted average cost of capital? Answer: The weighted average cost of capital (WACC) approach to capital budgeting involves forecasting the all-equity free cash flows of the firm and then finding the value of the levered firm by discounting the all-equity free cash flows at an appropriate WACC. It is a one-step procedure for finding the value of the operating assets plus the value of the interest tax shields. The weighted average cost of capital is the weighted sum of the after-tax required rate of return on the firm’s debt and the required rate of return on the firm’s levered equity. The weight for the after-tax rate of return on the firm’s debt is the ratio of the market value of the debt to the market value of total assets. The weight for the rate of return on the firm’s levered equity is the ratio of the market value of the equity to the market value of total assets. Once the total value of the firm is found, the market value of equity is found by subtracting the market value of the d ebt from the value of the levered firm. 4. Should a firm ever accept a project that has a negative NPV when discounted at the weighted average cost of capital? Answer: One reason we like the adjusted net present value approach to valuation is that it specifies all of the possible sources of value for a project. The WACC approach works well for projects that will support a certain percentage of leverage and that have no other associated features, such as interest subsidies or growth options that might add value to the project. If the only cash flows from the project are the ones that are being discounted and there are no other sources of value, other than the interest tax shields that are included in the WACC analysis, then the WACC approach finds the market value of the levered project. If this is negative, the project should be rejected. 5. Can you do capital budgeting for a foreign project using a domestic currency discount rate? Explain your answer. Answer: The answer to the question is yes; you certainly can do capital budgeting for a foreign project using a domestic currency discount rate. You just have to be careful to match the cash flows with the discount rate. One fundamental principle of capital budgeting is that the discount rate should reflect the currency of denomination of the expected cash flows that are being discounted. If a foreign project is providing expected future foreign currency cash flows, these can be discounted to the present using a foreign currency discount rate that reflects the riskiness of the project. The domestic currency present value of this foreign currency present value can then be determined by converting from the present value of foreign currency into the present value of domestic currency using the spot exchange rate. Alternatively, one can generate expected future domestic currency cash flows in future years by converting expected future foreign currency cash flows into expected future dome stic currency cash flows using expected future spot exchange rates. These expected future domestic currency cash flows should then be discounted to the present using an appropriate domestic currency discount rate. 6. Why might it be important to use period-specific discount rates when doing capital budgeting? Answer: We know that risk free spot interest rates are the appropriate discount rates for cash flows from risk free pure discount bonds. If the term structure of spot interest rates is not flat, that is, if it is upward sloping or downward sloping, using the same discount factor for all the cash flows of a risky project will not be correct. If the term structure is upward sloping, and you use the single long-term rate as the base for your risk adjusted discount rate, you will needlessly penalize the earlier cash flows from the project because short-term spot interest rates are lower than long-term spot interest rates. Conversely, if the term structure is downward sloping, and you use the single long-term rate as the base for your risk adjusted discount rate, you will be incorrectly enhancing the value of the earlier cash flows from the project because the short-term interest rates that should be used to discount near-term cash flows are higher than the long-term rates that should be used to discount longer-term cash flows. 7. Why is it necessary to consider forecasts of real currency appreciation and depreciation when doing an international capital budgeting analysis? Answer: The most important reason to consider forecasts of real currency appreciation or depreciation is that it is likely that a change in the real exchange rate will affect the cash flows of the project. Remember that a real depreciation of the domestic currency makes domestic exporters more profitable and domestic importers less profitable. Also, real appreciations typically reverse themselves somewhat slowly, so that knowledge of the current situation is necessary to know whether the future expected changes in the real exchange rate are going to enhance or detract from the cash flows of the project. Finally, if forecasts of nominal exchange rates are being made with uncovered interest rate parity, these will be somewhat different than forecasts based on relative purchasing power parity. If the market thinks that there will be a real appreciation or depreciation in the future, forecasts of nominal exchange rates based on relative purchasing power parity will not be correct. 8. What is the rate of return on invested capital? How is it calculated? Answer: The rate of return on invested capital is the free cash flow of the firm divided by the firm’s total assets. If the firm is earning its weighted average cost of capital, the rate of return on invested capital should equal its WACC. If we think of an investment that the firm is making, the rate of return on capital expenditure is the incremental free cash flow divided by the CAPX. Here again, it is important for the firm to do investments in which the rate of return on invested capital equals or exceeded the WACC – otherwise the firm is destroying value. 9. If you borrow a foreign currency, what interest deduction would you receive on your taxes? Answer: When you borrow in a foreign currency, you get an interest deduction for the domestic currency value of the foreign interest that you pay. 10. If you borrow a foreign currency, are there any capital gains taxes to worry about? Answer: If you borrow in a foreign currency, there are capital gains taxes to worry about. If the domestic currency has appreciated relative to the foreign currency between when the initial borrowing took place and when the principal is being repaid, it takes less of the domestic currency to repay the foreign currency principal than the amount of domestic currency that you had access to when you borrowed. Thus, you are repaying less than you borrowed and that capital gain is income to you and is taxed by the fiscal authorities. Conversely, if the domestic currency has depreciated relative to the foreign currency between when the initial borrowing took place and when the principal is being repaid, it takes more of the domestic currency to repay the foreign currency principal than the amount of domestic currency that you had access to when you borrowed. Thus, you are repaying more than you borrowed and that capital loss is deductible for tax purposes. 11. Why might a manager accept a high-variance, low-value project instead of a low-variance, high-value project? Answer: Shareholders only gain in good states of the world, and if the variance of the firm is higher, they gain more in those good states. Holders of debt get paid their full amount in good states of the world, and they get the value of the firm in the bad states of the world. By accepting a high variance project, managers may be able to shift some value from bondholders to shareholders. In such a situation the manager is said to have engaged in asset substitution. 12. Why would a manager not accept a positive net present value project? Answer: The value of the project accrues to the firm as a whole. Thus, if the firm has risky debt in its capital structure, some of the value of the project will accrue to the bondholders, and the remainder will accrue to the equity holders. The increase in the value of equity may be less than the equity holders must contribute to finance the investment in the project. Hence, a manager acting in the interests of the shareholders would forego such a project. This situation is referred to as an underinvestment problem.

What characterised the Anglo-American Special Relationship during the Essay

What characterised the Anglo-American Special Relationship during the Cold War - Essay Example ps were cemented by the establishment of close ties between subsequent leaders of these countries as they sought to work together in national goals of influencing global economic and political systems. The cold war era is one of the period were the United States and Britain cooperated in a number of areas as both nations sought to secure their interests against resilient Soviet Union. The Anglo-American cooperation during cold was set had the objective of establishing close coordination in areas such economic performance, sharing of technological innovations and enhancing security through cooperation in defence and military movements in strategic areas. The strategies for achieving these goals were pegged at achievement of mutual benefit although there were instances where the two friendly nations were unable to share a common perspective on an issue as seen in the British attempt to ouster Nasser from Egypt presidency, which the United States did not support.1 However, the Anglo-American special relationship worked for the benefit of the countries especially when facing a perceived common threat. Therefore, given the mutual perception of Russia held by both Britain and the United States, it was only practical that the relationship would establish more areas that they agreed than where the countries did have a consensus on the best approach to handle a given domestic or international situation. Many nations that emerged from the Second World War as well as countries that had gained their independence in the past few decades faced considerable danger of falling under the influence of Soviet Union especially since they did not have strong institutional and political structures to assert their own identity. However, the reaction from these countries towards the Soviet Union could not be compared to the level of cooperation put in place by the United States and Britain as the two countries developed a coalition to face any potential threat from the Soviet Union in

Industrial Relations Law in UK Essay Example | Topics and Well Written Essays - 3250 words

Industrial Relations Law in UK - Essay Example The industrial relations law of a particular country have a strong nexus with its broad policies as far as human resource management and employee satisfaction are concerned. These laws imply the state of affairs within the operation sphere where the workers are the one's generating maximum profitability and efficiency through their positive contribution. (Collins, 2005) In this regard, the industrial laws deal with areas of integrating personal and organisational interest, apart from widespread applicability of suitable measures of motivation and training which in turn will contribute to the worker efficiency and a cost effective strategy for achieving organisational goals. This paper deals with the industrial relations law that has been prevalent in the United Kingdom or UK with a focus on comparing the same with international standards in terms of its right to strike and the freedom of association. The categories in this paper will broadly include legal and sociological implications and issues of the industrial law in UK. After several breakthroughs in defining the contextual implications of human resources and employee relationships, Sidney and Beatrice Webb created a stark picture of the quality of trade unionism in the 1894. This was a major revelation for the social historians of that time in context of their contribution to the analysis of the system followed in Great Britain in terms of industrial relations. This aspect of study even became a full fledged field of study at Oxford by 1908. (Hyman, 2003. p 37 to 56) It has also helped defined the right of association and strike as rights that are inherent in the employees workspace where he or she may demand a certain economic and social status depending on the level of contribution to overall productivity. This further led to the construction of a framework within which these employees can call themselves the workforce within a certain industry or organisation, and thereafter affiliate themselves with an organisation called trade union which wil l identify their rights and help them adopt methodologies like collective bargaining, negotiations and even strikes, if need be, to attain the same. In this regard, the trade unions call themselves the representatives of the workforce and fight for their rights. This has given rise to various theories in terms of collective bargaining as well as the formal conception of the right to associate and the freedom to strike, in industrial laws the world over. This revolution started with UK due its history of industrial development, where it has been hailed as an international pioneer of the industrial revolution. This is, therefore, the most comprehensive definition of the Right to Strike and the Freedom of Association in UK's industrial law, which provides for clauses and immunities under these rights. (Collins, 2005) In this case, it is imperative to move forward only after briefly touching upon the origin of this law. Thus, through a keen focus on trade unionism, which was major trend in the industrialisation process, by the scholars and historians of that time, Great Britain saw the birth and evolution of its industrial relations law, that helped define the context and framework within which collective bargaining and other activities like employer employee relations would be

Essay Topics for Your Argumentative Essay

Essay Topics for Your Argumentative EssayIf you're like me, you've had enough of your life trying to figure out the best topics for your essay on Lord of the Flies. At some point I started thinking of lists of topics and lists of examples of topics I could use and then got bored with it.An essay topic is like a puzzle, you have to look at all the pieces and match them together. If you study a topic for more than one day or for more than a week, you'll realize that there's just no way you can create a whole topic all by yourself. In this article I will show you some examples of essay topics I have used to its full potential. I hope they can help you in your quest for essay topics.Because I'm an English major, I found this as an excellent topic for my essay on Argumentative Essay Topics - 'Prince Munchausen'. It's funny because I actually know nothing about Munchausen at all. I knew of him, but I didn't really know him.This is one of my favorite essays in my entire collection of argume ntative essay topics. My friend and I used this topic to discuss the perfect day for a couple to get married. I would have to admit that she was right. I think I found this topic first and that's why it was the best one to use.I love the title, 'The Best Essay Topic Ever' because it takes the best essays that I've ever read and turns them into the funniest essays ever. There's only a few topics that could come close to that.This is a list of essay topics I have used tothe fullest and I'm actually surprised by how many of them I found. The best example that I can think of is on Argumentative Essay Topics - 'The Great Alphas of the 80s'. I really love how it ended up.This is another example of essay topics I have used to the fullest. I had to have to use it because I was having a tough time making it through my books. The story had to be used, because if it wasn't, I would have ended up reading through some of my books. And if I could have found an even better topic, I could have work ed at my entire collection of essay topics and made it a whole new set.

College Essay Translations

College Essay TranslationsCollege essays can be a huge undertaking and many students turn to college essay translations for help. In these cases, students will need to find ways to translate their opinions and experiences into the form of words and sentences that will be acceptable to a school. Here are some ways to translate these memories into documents that can make it easier for college officials. In most cases, a student will want to use a formal term in the essay to say what he or she thinks the person is thinking but in reality a more personal and descriptive word can be used to convey the same meaning.References can be found in a variety of places. From family members, friends, teachers, and even family pictures are great references. Of course, the location where these references are found should be kept in mind when students choose to use them. A reference should be accompanied by more details on the person that the essay will be using and if the student wants the reference to have credibility, they should include that information as well. The essay can also include information about other references that have not been referenced and may be more relevant for the reader of the essay.Creating the topics of the college essay will need to be done. The essay should be very broad, focusing on a single topic for each chapter. However, in doing this, there are certain areas that will need to be addressed. To make sure the essay is complete, the writer should include the whole reason why they are writing this essay, why they feel it is important, and any specific reasons why they feel it is important. There may be a little bit of personal background included, but it should be kept to a minimum.One way to make personal stories more interesting and relatable is to focus more on the personal aspects than the traditional details. This can be a challenge because many students tend to stick to stories that tell about the accomplishments or achievements of the person. Students should keep this in mind when working on the stories and include stories about the person's day-to-day life as well.An important aspect to this essay is to include career information. This is a must for students that want to make sure their information is well known. This information may include their work history, educational achievement, and interests. When using this information, students should also include work experience in each paragraph.Many students want to make their college essay unique but also match up with their personal style and personality. Another way to accomplish this is to be honest with the readers. The essay can include quotes or stories that reflect true opinions. They should be from people who are close to the student, at least to a point. By choosing this option, the reader will know the writer is honest and to the point.All in all, students have the ability to help with their college essay translation by following a few simple steps. The final re sult will make the school more confident in the assignment and the student will be happy with their work.

The Research Paper Topics for Ancient History Game

The Research Paper Topics for Ancient History Game Research Paper Topics for Ancient History Can Be Fun for Everyone Perhaps you still have to understand more about the way to compose a history paper. History is a subject that's always tightly linked to the theory of time and space. History papers can have a while to write. Ancient history research papers supply you with a fantastic opportunity to search for the reply to these critical questions. You wish to translate that feeling in your paper. Just bear in mind that it will be quite difficult to add something new to the already conducted researches of the classical parts of literature. The absolute most renowned parts of Mesopotamian art. Art from this era aimed toward capturing the know-how of the individual plus attractiveness of the standard planet. This can offer a lot of insight in their distinctive culture. But understanding how Grecian culture affected cultures like the Romans or even the usa is something historians have been attempting to understand for many years. Afterwards, the greatest action to do is to narrow the subject down according to the guidelines supplied by your professor. Evaluate the means of life for the Native American. If you wish to compose the essay yourself, we believe it would be best to select a universal subject or issue. For that reason, it is sometimes a very good idea to attempt to choose a topic that you feel you will delight in researching about, together with writing about. In case the topic is too narrow, you might find it difficult to locate the appropriate literature. Choosing one of our suggested topics will enable you to start writing a thriving research paper. Research Paper Topics for Ancient History - Dead or Alive? You'd be hard-pressed to spot any component of our modern world that wasn't influenced by ancient Greece in some manner. This region has gotten economically, socially and culturally more developed than the rest of earth. Not everything was digitized. It's much enough to present your audience the comprehensive picture and, from the flip side, it won't overload them with details and will provide you with the chance to study everything thoroughly. Let us do the job that's right for you, so you have sufficient time to do what you wish to do! However, you can rest assured that you're getting a fine work for the price tag you're paying. You should have your reasons, and our principal concern is that you find yourself getting a great grade. Both options aren't good enough because it's going to be difficult to choose the best literature. Discuss its advantages on the folks. Things You Should Know About Research Paper Topics for Ancient History There are lots of tutorials and lectures which you'll be able to attend about the creation of excellent research papers. Whenever you opt to ask us for skilled support, don't hesitate to speak to our support managers. In summary, choose poorly and you may well receive a terrible outcome. What you have to be in a position to do is to write well and that's the topic of another guide. Brainstorming activities might provide help. It's possible to find out more regarding students' term papers here. Students lead busy lives and frequently forget about a coming deadline. If a student believes that it's simple to select what things to compose about, that student isn't right.

Details of Writing a Research Paper Middle School Lesson Plan

Details of Writing a Research Paper Middle School Lesson Plan If you don't observe the standards you require, simply tell us and we can have them loaded for you! While vocabulary is important to reading children begin constructing their vocabulary long before they begin learning how to read and keep constructing their vocabulary long once they have mastered the fundamentals of reading. Repeatedly exposing children to vocabulary words in many different contexts brings increased depth to their knowledge of the word and recognition. Therefore, it runs with wonderful accuracy with no downtimes. When a company owner says Not interested it may be because of several reasons. As an example, let's say you want students to know how to paraphrase research. Do your homework before walking into the company. 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Writing lessons are extremely popular with students and I am sure you're interested in boosting your writing abilities. It do not need to be difficult. Picking a superb topic has become the most significant part writing a paper. What's more, select a topic that you can readily manage. The topic is one which can be discussed for a length period of time and has different aspects for the blogger to deal with. Yo u don't want a topic that's too broad, or you won't be in a position to cover enough details about it in your paper. The technique which you use needs to be suitable to the type of paper you're writing. Possessing an excellent outline shows you understand how to compose a research paper for middle school. Increase your hand as soon as you know one. At length, you make it to the conclusion of the human body of the paper. 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Some middle and higher school students might want to revise their introduction paragraphs several times before they are all set to go ahead.