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Chapter 3

International investment appraisal

2.1 Introduction

The appraisal of projects involving international investments uses the same basic
approach that we introduced in the last chapter i.e. it starts with a FCF forecast,
including:

 identifying relevant cash flows,

 calculating the tax liability, including the calculation of tax relief on capital
expenditure,

 dealing with inflation and distinguishing between nominal and current cash
flows.

Additional challenges

 Forecasting future exchange rates.

 Double taxation.

 Inter-company flows (e.g. management charges or royalties).

 Remittance restrictions.

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