国际财务管理答案Chap018.docx
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国际财务管理答案Chap018.docx
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国际财务管理答案Chap018
CHAPTER18INTERNATIONALCAPITALBUDGETING
SUGGESTEDANSWERSANDSOLUTIONSTOEND-OF-CHAPTER
QUESTIONSANDPROBLEMS
QUESTIONS
1.Whyiscapitalbudgetinganalysissoimportanttothefirm?
Answer:
Thefundamentalgoalofthefinancialmanageristomaximizeshareholderwealth.CapitalinvestmentswithpositiveNPVorAPVcontributetoshareholderwealth.Additionally,capitalinvestmentsgenerallyrepresentlargeexpendituresrelativetothevalueoftheentirefirm.Theseinvestmentsdeterminehowefficientlyandexpensivelythefirmwillproduceitsproduct.Consequently,capitalexpendituresdeterminethelong-runcompetitivepositionofthefirmintheproductmarketplace.
2.WhatistheintuitionbehindtheNPVcapitalbudgetingframework?
Answer:
TheNPVframeworkisadiscountedcashflowtechnique.Themethodologycomparesthepresentvalueofallcashinflowsassociatedwiththeproposedprojectversusthepresentvalueofallprojectoutflows.Ifinflowsareenoughtocoveralloperatingcostsandfinancingcosts,theprojectaddswealthtoshareholders.
3.Discusswhatismeantbytheincrementalcashflowsofacapitalproject.
Answer:
Incrementalcashflowsaredenotedbythechangeintotalfirmcashinflowsandcashoutflowsthatcanbetraceddirectlytotheprojectunderanalysis.
4.Discussthenatureoftheequationsequence,Equation18.2ato18.2f.
Answer:
Theequationsequenceisapresentationofincrementalannualcashflowsassociatedwithac
apitalexpenditure.Equation18.2apresentsthemostdetailedexpressionforcalculatingthesecashflows;itiscomposedofthreeterms.Equation18.2bshowsthatthesethreetermsare:
i)incrementalnetprofitassociatedwiththeproject;ii)incrementaldepreciationallowance;and,iii)incrementalafter-taxinterestexpenseassociatedwiththeborrowingcapacitycreatedbytheproject.Note,theincremental“netprofit”isnotaccountingprofitbutrathernetcashactuallyavailableforshareholders.Equation18.2ccancelsouttheafter-taxinteresttermin18.2a,yieldingasimplerformula.Equation18.2dshowsthatthefirsttermin18.2cisgenerallycalledafter-taxnetoperatingincome.Equation18.2eyieldsyetacomputationallysimplerformulabycombiningthedepreciationtermsof18.2c.Equation18.2fshowsthatthefirsttermin18.2eisgenerallyreferredtoasafter-taxoperatingcashflow.
5.WhatmakestheAPVcapitalbudgetingframeworkusefulforanalyzingforeigncapitalexpenditures?
Answer:
TheAPVframeworkisavalue-additivitytechnique.Becauseinternationalprojectsfrequentlyhavecashflowsnotencounteredindomesticprojects,theAPVtechniqueeasilyallowstheanalysttoaddtermstothemodelthatrepresentthespecialcashflows.
6.Relatetheconceptoflostsalestothedefinitionofincrementalcashflow.
Answer:
Whenanewcapitalprojectisundertakenitmaycompetewithanexistingproject(s),causingtheoldproject(s)toexperiencealossinsalesrevenue.Fromanincrementalcashflowstandpoint,thenewproject’sincrementalrevenueisthetotalsalesrevenueassociatedwiththenewprojectminusthelostsalesrevenuefromtheoldproject(s).
7.Whatproblemscanenterintothecapitalbudgetinganalysisifprojectdebtisevaluatedinsteadoftheborrowingcapacitycreatedbytheproject?
Answer:
Ifprojectdebtisgreater(less)thantheborrowingcapacitycreatedbythecapitalproject,andtaxshieldsontheactualnewdebtareusedintheanalysis,theAPVwillbeoverstated(understated)makingtheprojectunjustlyappearmore(less)attractivethanitactuallyis.
8.WhatisthenatureofaconcessionaryloanandhowisithandledintheAPVmodel?
Answer:
Aconcessionaryloanisaloanofferedbyagovernmentalbodyatbelowthenormalmarketrateofinterestasanenticementforafirmtomakeacapitalinvestmentthatwilleconomicallybenefitthelender.ThebenefittotheMNCisthedifferencebetweenthefacevalueoftheconcessionaryloanconvertedintothehomecurrencyandthepresentvalueofthesimilarlyconvertedconcessionaryloanpaymentsdiscountedattheMNC’snormaldomesticborrowingrate.Theloanpaymentswillyieldapresentvaluelessthanthefaceamountoftheconcessionaryloanwhentheyarediscountedatthehighernormalrate.ThisdifferencerepresentsasubsidythehostcountryiswillingtoextendtotheMNCiftheinvestmentismade.ThebenefittotheMNCoftheconcessionaryloanishandledintheAPVmodelviaaseparateterm.
9.WhatistheintuitionofdiscountingthevariouscashflowsintheAPVmodelatspecificdiscountrates?
Answer:
TheAPVmodelisavalue-additivitytechniquewheretotalvalueisdeterminedbythesumofthepresentvaluesoftheindividualcashinflowsandoutflows.Eachcashflowwillnotnecessarilyhavethesameamountofriskassociatedwithit.Toaccountforriskdifferencesinthe
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- 国际 财务管理 答案 Chap018