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Multi National Corporations

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Multi National Corporations

download word file, 4 pages (32KB)

General Topic: Accounting - Corporate Finance
Citation Style: APA
Sources: 2
Views: 82
Words: 1231
Pages: 4
Paper #: 66968505

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Once the decision to expand overseas has been made and the mode of entry has been settled upon, the MNC must then consider the best method of paying for the transaction. In some cases, the method of payment can have a significant impact on the projects net present value. For example, if a firm wishes to set up greenfield with a factory in a foreign country, it could pay with cash, with a debt issue or with an equity issue. Each of these options comes embedded with a different cost of capital and different time frames. As such, the financing decision becomes integral to the projects long-term success. When a merger or acquisition is undertaken, the decision becomes even more complex. Cash, stock or debt could be all utilized, but there are further considerations. Acquiring ownership of a foreign company exposes the MNC to a wide range of factors and risks, including political risk, operational risk and more. Each of these risks carries costs or potential costs that will impact the profitability of the project

Another risk that the finance department must consider when expanding internationally is foreign currency risk (BNet, 2010). There are two sides to foreign currency

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