Explain the characteristics of capital budgeting for multinationals. Why a foreign project should be evaluated both from a project and parent view point.

Word Count : 542

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Capital budgeting is the process of evaluating and selecting long-term investment opportunities that involve significant outlays of capital. For multinationals, capital budgeting decisions are more complex due to various factors such as differences in legal, regulatory, and tax environments, exchange rate risk, and political risk. Here are some characteristics of capital budgeting for multinationals:

1. Cross-border investments: Multinationals invest in projects in different countries, each with its own unique economic, legal, and regulatory environment. As a result, capital budgeting for multinationals requires an understanding of the various risks and challenges associated with cross-border investments.

2. Exchange rate risk: Multinationals face currency risk when investing in foreign projects. Exchange rate fluctuations can impact the profitability of foreign investments and can have a significant impact on the value of multinational firms.

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Degree : MASTER DEGREE PROGRAMMES
Course Name : Master in Business Administration
Course Code : MBA
Subject Name : International Financial Management
Subject Code : MMPF 5
Year : 2023