International Business Finance Case Study Example | Topics and Well Written Essays - 1500 words

International Business finance - Case Study ExampleThere is transfer of technology between the subsidiaries and the pargonnt firm in the joint chance and the industrial output of the joint venture. Therefore the following raise be far-famed from the joint venture under the st investgic option 1.In this multinational capital budgeting there are various factors as well as assumptions that were taken into consideration to determine the expected returns from the joint venture from the parents firm side. First and foremost the exchange rates fluctuations were taken into narrative curiously when converting the subsidiary earnings into the parent firms reporting currency. Given that is challenging to precisely see the rates of exchange rates, the determination of the expected returns in pounds were established using the spot exchange rate of 0.8410/. Besides, the cost of inflation was taken into account which was charged on the cost of operations to incorporate the wear and tear rat es and the interest rates on loans based in Germany borrowing rates. Even though the expectation of costs or price completely takes into account the inflation, the rates of inflation rates at tikes can be volatile from one year to another for some states (Madura, 2011 p. 49). Hence the cost of inflation from the Germany perspective was taken to be 2.5%.Lastly, the financial arrangements were put into account. These include the costs of finance which is captured by the rate of give notice and the taxation rate. Nonetheless, when the foreign based projects are partly financed using the subsidiaries in the foreign nations, a more precise strategy is applied to distinguish the investment in the subsidiary and openly take into account the loan repayment of the foreign loans as cash outflows. Moreover, the returns from the Germany were not taxed due to the double taxation pact that exists between Germany and United Kingdom. The following calculations can be noted under strategic optio n ace the