Question

international FINA

LIST THE FACTORS THAT affect international projects cash flow calculation of NPV. Once you have a complete list, explain how NPV will be affected with Increase or FALL FOR example: If a project is expropriated, NPV will go down Assume the project is in a safe friendly country. pproach it by cons I'll illustrate the starting point Assume Purchase, freight / installation/ construction costs and initial purchases of spare parts and inventory are all known and locked in. This means vour initial investment is a fixed number Assume you financed the Initial Investment.. explain BOTH PERSPECTIVES ...using a domestic loan and using a foreign loan. Each year there is Revenue Each year there are Operating costs (labor, Cost of Goods Sold, Selling and Administrative expenses) Answer the question using Foreign Labor and BOTHH Foreign and Domestic Sales Staff salaries. (HINT effect of wage increase) Taxes -assume a tax treaty in place between the two countries Depreciation Remember some of the tricks to use if a country idering cash flows over time blocks profits from leaving... leading lagging loans etc

Answer 1

LIST OF FACTOR AFFECTING CASH FLOW

1. INFLATION RATE

2 INTEREST RATE

3.EXCHANGE RATE

4 GOVERNMENT POLICY

5 PROJECT PROJECT

6 INVESTMENT APPRAISAL

7 TAX STRUCTURE OR LOCAL LAWS

NPV IS PRESENT VALUE OF FUTURE EXPECTED CASH FLOW

IF INVESTMENT IS LESS THAN NPV THAN PROJECT IS VIABLE

INCREASE AND DECREASE IN CASH FLOW DIRECTLY AFFECT ON NPV BECAUSE NPV IS NOTHING JUST A CASH FLOW DISCOUNTED BY TIME VALUE OF MONEY i.e. INTEREST RATE

LOAN FORM HOME COUNTRY AND INTERNATIONAL LOAN ALSO AFFECT THE NPV BECAUSE EXCHANGE RATE AT THE TIME OF REPAYMENT HAVE DIRECT AFFECT ON NPV