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Multinational Capital Budgetingof Rastgar Pakistan

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LAYOUT

Introduction

Motives & Diversification

Benefits

Host Country's Views of DFI

Analysis of project with the help

of Multinational CapitalBudgeting Techniques.

Conclusion

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INTRODUCTION

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Company Profile

Rastgar Engineering Company

Pakistan Based

Exports in 23 countries

Three Types of Products

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Objectives of REC

Providing of Quality Products totheir customers

Fulfilling of Social Responsibility byCompany

Retaining of Highly skilledEmployees

Providing high returns to itsshareholders

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Types of Products

Wheel Hubs

Steering KnucklesBrackets

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Importance of REC in Pakistan

First Company to sign GlobalCompact

Manufacturing Quality products to

export in foreign countries

New Job opportunities

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Future Plans of REC

A new subsidiary in Germany

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Objectives of the Study

To suggest best timing of DFI

To suggest best FinancingArrangements

To suggest how to avail the

advantages of InternationalDiversification.

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MOTIVES &

DIVERSIFICATION

BENEFITS

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Cost Related Motives

Fully benefit from economies of scale.

Use of skilled personal from Germany

React to exchange rate movements.

Diversify sales/production internationally

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Revenue Related Motives

Attract new sources of demand

React to trade restrictions

Benefit of small distance from the

high export countries

Vehicles making countries are verynear

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Benefits of International Diversification

Low risk

Benefits of new economic opportunities

Availability of raw material

Low cost

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HOST COUNTRIES

VIEWS OF DFI

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Incentives to Encourage DFI

Cheap Labor

Competitive Tax SystemCorruption Free Environment

Labor related incentives

Infrastructure SubsidiesR&D Infrastructure

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Barriers to DFI

Industry Barriers

Environmental Policies

Blocked Funds

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ANALYSIS OF PROJECT WITH

THE HELP OFMULTINATIONAL CAPITAL

BUDGETING TECHNIQUES

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Inputs for Multinational

Capital Budgeting Initial Investment

Total Revenues per Year for the

Project Life i.e. 5 years.

Total Variable Cost per Year

Total Fixed Cost per Year

Project Lifetime

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Inputs for Multinational

Capital Budgeting Exchange Rates

Required Rate of Return

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NPVs of REC for the 5 Years

Cumulative NPV in German Euro

-766104107

650383842.5

528144126.3

402110405.3

95747080.79

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NPVs in case of Blocked Funds

Cumulative NPV in German Euro

-871980000

871980000

871980000

871980000

75718101.07

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NPVs in case of Strong Rupee

Cumulative NPV in German Euro

-766104107.1

650383842.5

528144126.3

402110405.3

95747080.79

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CAPITAL BUDGETING ANALYSIS IN CASE

OF WEAK RUPEE SCENARIO

Cumulative NPV in German Euro

-769755000

662015443.2

552421214.9

443771455.4

23493765971

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NPVs in case of Subsidiary

financing ArrangementCumulative NPV

-767053339

-652180603

-530697609

-405339533

9637805

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SENSITIVITY ANALYSIS

MOST LIKELY REVENUES

Cumulative NPV

-766104107

-650383842

-528144126

-402110405

95747081

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SENSITIVITY ANALYSIS

PESSIMISTIC REVENUES

Cumulative NPV in Dollars

-789834911

-688240124

-578612442

-463839466

23963783

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SENSITIVITY ANALYSISOptimistic

Cumulative NPV in Dollars

-750283571

-620437828

-485586078

-348291612

164647229

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Simulation Analysis

CAPITAL BUDGETING ANALYSIS IN CASE OF STRONGRUPEE SCENARIO

Cumulative NPV

-766104107

-650383842

-528144126

-402110405

95747080.8

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Simulation Analysis

CAPITAL BUDGETING ANALYSIS IN CASE OF WEAKRUPEE SCENARIO

Cumulative NPV

-769755000

-662015443

-552421215

-443771455

23493765971

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Simulation Analysis CAPITAL BUDGETING ANALYSIS IN CASE OF STABLE

RUPEE SCENARIO

-766104107

-650383842

-528144126

-402110405

28522413985

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Any Question.!!!

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TeachersComments

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