International Capital Budgeting

Capital budgeting at the international level does not eliminate any of the issues involved in capital budgeting at the domestic level. Additional issues, however, must be addressed at the international level. The following discussion considers issues that affect the process of international capital budgeting for all multinational firms. Issues related specifically to the application of international capital budgeting to capital investment proposals involving intellectual property.

Capital budgeting, as a process, is dependent upon

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es, & Klammer, 1994, p. 62). One suggestion within this context is the application of "life cycle accounting" (LCA), wherein an assessment of all costs related to project's life from conception through discontinuation are incorporated into the decision-making process (Boer, Estes, & Klammer, 1994, p. 62). The traditional approach to capital budgeting for international investment opportunities incorporates the specific complications of non-domestic projects into discounted cash flow analysis (Johnson, 1991, p. 11). The adjusted present value approach separates the international investment decision into several basic factors·the effects of blocked funds, profit remittance restrictions, different levels of taxation, concessionary loans, and the other effects of international financing in addition to the typical operating cash inflows and outflows generated by a project. The multi-stage model permits the independent assessment of the various factors. This approach also permits to use of variable discount rates for each component of the model as may be appropriate to the situation being assessed. "This model is quite useful in a majority of international investment situations. a A limiting factor of this approach appears with th
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Approximate Word count = 2169
Approximate Pages = 9 (250 words per page)