Question

What additional factors need to be considered when undertaking an international capital investment? What additional considerations are there for the cash flows and the rate of return? What incentives or barriers are given by the foreign government?

Answer 1

Ans. Some additional factors that need to be considered while undertaking an International Capital Investment are as follows : Political Environment of the Foreign Country , Company Laws of the foreign country , Policies and regulations of the Foreign Company , Exchange Rate Fluctuations , Banking Regulations of the Foreign Country etc. Additional Consideration for the Cash Flow and the rate of return are the usage of two sets of cash flow analysis : One for the Parent company and other for the Subsidiaries. The method of cash flow analysis for foreign company also need to be considered. The Foreign Exchange rates also needs to be considered for Cash Flow Analysis and Rate of Return. Some incentives given by foreign government are : Rebates on Taxes on Foreign Investment , Exemptions on taxes to the companies , Removal of Quotas on Imports , Reduction of Tariffs on Imports , Deregulation of sectors open for FDI , Simple laws on Foreign Investments etc. Some barriers used by the government are : Increasing Taxes on Investment done by foreign companies , Imposition of Quotas on Imports , Increase in Tariffs on Imports , Strict Laws on Foreign Investments , Regulation of Sectors open for FDI etc.

Best of Luck !! !!