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AbstractThis paper discusses the multinational capital budgeting problem — when there are some candidate foreign projects, which project(s) should the investor choose? In the paper, special cash flows and value sources of foreign projects are introduced. Regarding project parameters such as construction costs, annual net operating cash flows, terminal values of the projects as well as the foreign exchange rates as uncertain variables, the paper proposes one new uncertain zero–one integer model for optimal multinational project selection. To solve the problem, a hybrid intelligent algorithm integrating the 99 Methods and genetic algorithm is provided. As an illustration, an application example is also presented. KeywordsCapital budgeting Multinational capital budgeting Project selection Uncertain programming Cited by (0)Copyright © 2011 Elsevier Ltd. All rights reserved. Abstract This paper argues that the international firm should use the firm's global weighted average cost of capital to evaluate investment decisions, domestic and international, and to judge the performance of affiliates at home and abroad. The paper discusses the adjustment necessary to quantitate exchange risk and to account for financing that is subsidized or tied to particular investments. Foreign subsidiaries, it is argued, do not have an independent capital structure because their liabilities are explicitly or implicitly the obligation of the parent firm. Journal Information Managerial and Decision Economics is an international journal of research and progress in management economics. The journal publishes articles applying economic reasoning to managerial decision making. Compared to other journals in economics, the focus of this journal is more normative than positive and the viewpoint is focused on managerial efficiency rather than on social welfare. Managerial and Decision Economics has articles from all of the functional areas of economics, as long as these articles are useful for managerial decision making, and from all the functional areas of business, so long as the articles use economic reasoning. Managerial and Decision Economics is currently published 8 times a year. Publisher Information Wiley is a global provider of content and content-enabled workflow solutions in areas of scientific, technical, medical, and scholarly research; professional development; and education. Our core businesses produce scientific, technical, medical, and scholarly journals, reference works, books, database services, and advertising; professional books, subscription products, certification and training services and online applications; and education content and services including integrated online teaching and learning resources for undergraduate and graduate students and lifelong learners. Founded in 1807, John Wiley & Sons, Inc. has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Wiley has published the works of more than 450 Nobel laureates in all categories: Literature, Economics, Physiology or Medicine, Physics, Chemistry, and Peace. Wiley has partnerships with many of the world’s leading societies and publishes over 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols in STMS subjects. With a growing open access offering, Wiley is committed to the widest possible dissemination of and access to the content we publish and supports all sustainable models of access. Our online platform, Wiley Online Library (wileyonlinelibrary.com) is one of the world’s most extensive multidisciplinary collections of online resources, covering life, health, social and physical sciences, and humanities. Rights & Usage This item is part of a JSTOR Collection. Abstract Capital budgeting for the multinational corporation presents many problems that rarely if ever exist in domestic capital budgeting. This paper examines such problems and suggests ways to cope with them by adjusting cash flows instead of the cost of capital. Journal Information Financial Management (FM) serves the profession by publishing significant new scholarly research in finance that is of the highest quality. The principal criteria for publishability are originality, rigor, timeliness, practical relevance and clarity. FM enjoys a broad circulation among academics and practitioners, and as such, links those generating new knowledge with those responsible for employing that knowledge in the creation of value. FM offers a unique balance of rigor and originality of research with practical relevance. Publisher Information Wiley is a global provider of content and content-enabled workflow solutions in areas of scientific, technical, medical, and scholarly research; professional development; and education. Our core businesses produce scientific, technical, medical, and scholarly journals, reference works, books, database services, and advertising; professional books, subscription products, certification and training services and online applications; and education content and services including integrated online teaching and learning resources for undergraduate and graduate students and lifelong learners. Founded in 1807, John Wiley & Sons, Inc. has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Wiley has published the works of more than 450 Nobel laureates in all categories: Literature, Economics, Physiology or Medicine, Physics, Chemistry, and Peace. Wiley has partnerships with many of the world’s leading societies and publishes over 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols in STMS subjects. With a growing open access offering, Wiley is committed to the widest possible dissemination of and access to the content we publish and supports all sustainable models of access. Our online platform, Wiley Online Library (wileyonlinelibrary.com) is one of the world’s most extensive multidisciplinary collections of online resources, covering life, health, social and physical sciences, and humanities. |
Why might the cost of capital for a foreign project differ from that of an equivalent domestic project?
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