Cross Border Valuation Essay

11147 Words Apr 13th, 2015 45 Pages
Rev. August 7, 1997

Cross-Border Valuation
Cross-border investment has assumed a prominent place among the key decisions facing investors and corporate managers. In today’s increasingly global marketplace, many investment projects, corporate acquisitions and mergers have important international components. The importance of cross-border valuation methods have been underscored by trends toward the relaxation of capital controls, European economic integration, and, since the early 1990s, the opening and growth of Eastern European, Russian, Asian and Latin American markets.
Cross-border acquisitions have been a particularly prevalent form of investment since 1980.
American corporations, for example, increased their
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Whether to use foreign or domestic tax rates.

The proper calculation of the cost of capital used to discount the cash flows.

The appropriate treatment of special risks unique to cross-border investments such as foreign exchange risk, political risk, etc.

This note is a revised and abridged version of the “Note on Cross-Border Valuation” (HBS No. 292-084), originally prepared by Professor W. Carl Kester and Research Associate Julia Morley, abridged by Professor Kenneth A. Froot, as the basis for class discussion.
Copyright © 1995 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

This document is authorized for use only by Asif Junaid in Columbia - Strategic Corporate Finance (Spring 2015) taught by Kevin Sweeney, Worcester Polytechnic Institute from March 2015 to
September 2015.

For the exclusive use of A. Junaid, 2015.

Cross-Border Valuation

Second, these issues are explored using two different discounted-cash-flow methods of valuation. These are the weighted average cost of capital method (WACC),

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