What is real option analysis? How is it a better method of making investment decisions than using traditional capital budgeting analysis?
Answer to relevant QuestionsCapital budgeting for a foreign project is considerably more complex than the domestic case. What are the factors that add complexity? A foreign subsidiary does not have an independent cost of capital. Is any accounting exposure created during the course of a firm’s operating cycle? Explain the difference between the “transaction motive” and the “precautionary motive” for holding cash. What methods might the U.S. Internal Revenue Service use to determine whether allocations of distributed overhead are being fairly allocated to foreign subsidiaries?
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