Acta Economica (Dec 2010)
ТHE FINANCIAL APPRAISAL OF THE FOREIGN INVESTMENT PROJECTS
Abstract
Considering global trends in the business world and growing extroversion of the world economies, today's enterprises are faced with the inevitability of investing abroad. Majority of multinational companies set up subsidaries in each country they have the interest to operate. International capital budgeting is defined as decision-making process on long-term investment of financial funds in real business assets abroad. In the viability appraisal of overseas investment projects, it is necessary to consider all the factors that influence evaluation process and choose projects profitable from the standpoint of the parent company. The main inputs in the international capital budgeting are discount rate defining, cash flows appraisal and forecast exchange rate selection. For financial rating of international projects, evaluation is extended by introducing adjusted net cash flow and modified net present value. Follow-up of the work and the results lead to conclusion that careful international capital budgeting is very significant for existence and further growth of multinational company. With the appreciation of the risk typical for international investment and proffesional appraisal of foreign projects, financial managers will decide to invest in project with the highest net present value and thus achieve the greatest benefits for shareholders of the company.
