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Finance and accounting : International business - Essay Example

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Finance and accounting : International business

domestic capital budgeting project: consideration of additional factors 9 Characteristics of multinational companies (MNCs) affecting the cost of capital 10 Ram plc and Pram plc: Benefits from economies of scale 10 Theory of Comparative Advantage as a motive for international trade: Usefulness 11 Reference 13 1. IBF Supplies Plc: Financial and non-financial factors influencing the proposal of establishing subsidiaries in Eastern Europe, Africa as well as Asia IBF Supplies Plc is one of the leading companies in the UK market in supplying office items to its clients. The company holds a competitive edge over the its competitors as its supplies the office items at competitive price and also the time of delivery of IBF Supplies Plc is comparatively low. The management of the company has assessed that there would be a decrease in demand in the domestic markets in future for which the Director has envisaged expansion of the company into foreign markets. IBF Supplies Plc found there is increasing demand of supply of its products in the markets of Eastern Europe, Africa as well as Asia. ...
The financial factors to be considered in the proposal of establishing foreign subsidiaries of IBF Supplies Plc in Eastern Europe, Africa as well as Asia includes assessment of the economy of the respective local markets, the costs involved in the foreign investments which ranges from the cost of raising of capital, cost for working capital, financing costs, etc. The financial factors also include assessment of financial risks, benefits and disadvantages associated with the foreign investments of IBF Supplies Plc. The non-financial factors to be considered which influences the foreign investment proposal of IBF Supplies Plc are the social factors, political factors, technological factors and the legal factors of the foreign land that has impact on the business of IBF Supplies Plc. The assessment of cost of raising capital is one of the most important financial factors to be assessed by IBF Supplies Plc. The capital may be raised from the local markets by IBF Supplies Plc through equity financing or debt financing. The equity financing option would involve share part of the ownership and control of the company but at the same time the cost and risk of the foreign investment would be shared. The debt financing option would incur re-payment of loans and interest payments to the lender over a period of time which could increase the cost of operation of the foreign subsidiaries. At the same time, IBF Supplies Plc would benefit from the tax deductibility feature of debt financing option by which it can reduce the payment of interest resulting out of the tax shield. The right mix of the debt-equity is to be ascertained for the foreign investments by IBF Supplies Plc. The social factors would influence the business as ...Show more


International Business Finance Contents Contents 2 1. IBF Supplies Plc: Financial and non-financial factors influencing the proposal of establishing subsidiaries in Eastern Europe, Africa as well as Asia 3 Foreign investments of IBF Supplies Plc: Potential risks and possible external strategies to manage such risks 4 IBF Supplies Plc: Foreign entry strategies other than establishing a foreign subsidiary 6 2…
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