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    Direct Foreign Investment

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    Respond to the following statements

    1. Develop some of the motives for Direct Foreign Investment.
    Direct Foreign Investment can be viewed as one of the alternative means available to a business for picking up a particular opportunity and for acquiring an internationally nontransferable foreign asset in an indirect way. Some of the motives that for Direct Foreign Investment, would be resource seeking, MNEs that are looking to gain resources that are not available within their home country like natural resources or raw materials that are available at a lower cost. Market seeking would also be how an MNE may invest in a foreign country to exploit the possibilities granted by markets of greater dimensions. Efficiency seeking is a motive for MNEs this is when a business takes advantage of difference in the availability and costs of traditional factor endowments in different countries and they take advantage of the economies of scale and scope and of differences in consumer tastes and supply capabilities. It appears that when a host country or foreign business can deliver a source of new technologies, wealth, developments, products, and management skills at a lower cost these would be good reasons for Direct Foreign Investments. Additional motives for Direct Foreign Investment would be to take advantage of lower costs in labor and transportation costs.

    2. Develop some of the motives for Direct Foreign Investment.
    Direct foreign investment is when a company from one country makes a physical investment in building a factory in another country. Some of the motives for direct foreign investment include providing a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products skills and financing. The host country or foreign firm can provide a source of new technologies, capital, processes, products, organizational technologies and management skills. Direct foreign investment can provide economic development in a foreign company.

    3. Describe the capital budgeting steps that would be necessary to determine whether a proposed project is feasible as related to some specific situation.
    Capital investments are long-term investment in which the assets involved have useful lives of multiple years. Capital budgeting involves identifying the cash inflows and cash outflows rather than accounting revenues and expenses flowing from the investment.
    The steps involved in capital budgeting are:
    1) Identify long-term goals of the individual or business
    2) Identify potential investment proposals for meeting the long-term goals
    3) Estimate and analyze the relevant cash flows of the investment proposal
    4) Determine financial feasibility of each of the investment proposals by using the capital budgeting methods
    5) Choose the projects to implement from among the investment proposed outline
    6) Implement the projects in line 5
    7) Monitor the projects implement as to how they meet the capital budgeting projections and make adjustments when needed.

    4. Describe the capital budgeting steps that would be necessary to determine whether a proposed project is feasible as related to some specific situation.
    Capital budgeting decisions are the most important investment decision made by business. Capital investments are important because they involve substantial cash and once made, are not easily reversed. Some of the capital budgeting steps that would be necessary to determine whether a proposed project is feasible as related to a specific situation would begin with the need to estimate the amount of product that would need to be sold to a distributor. Once the long term goal has been identified the next step would be to identify the value of the investment, this investment would be forecasted for each month so that the dollar cash inflows can be estimated. Once this estimate has been completed and analyzed of what the relevant cash flows will be of the investment the next step would be to review the cash outflows from the expenses from performance within production. There needs to be a determination of financial feasibility of the investment proposals by using capital budgeting methods. Once the dollar cash inflows and outflows are estimated, they can be used to derive the net cash flows. The net cash flows can be discounted to determine the present value of net cash flows. Finally, the projects need to be monitored and adjustments made as they are needed.

    5. Some assume that fiscal incentives such as lower taxes for multinational corporations and market preferences are the main reasons for foreign owned companies to invest in the country. Do you agree?

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    https://brainmass.com/business/international-finance/direct-foreign-investment-611465

    Solution Preview

    The response addresses the query posted in 1414 words with APA References

    //In the given paper, the response has been provided in context to the student posts presented in context to the motives of foreign direct investment. It has been reflected whether the given post has sufficiently covered pertinent and thorough information or not. //

    Response 1

    In response to this given question, motives for the foreign direct investment have been satisfactorily explored and depicted. Your response reflected a number of motives for foreign direct investment in all aspects of resource seeking, market seeking, efficiency seeking and cost efficiency seeking. All these mentioned motives of the foreign direct investment play a significant role in inducing MNEs to invest in the country. It is because no country across the globe whether developing or developed has efficient resources to meet all requirements to a high extent. On this basis, investment in the other nations would be initiated to explore varying advantages; for instance, easy access to raw material, technologies, knowledge and expertise. Additionally, you have provided illuminating knowledge and information regarding the motives for foreign direct investment as your response has demonstrated economies of scale, factor endowments, customers' tastes and preferences and supply capabilities. Overall, you have explored good information regarding the motives of foreign direct investment; however, you could have included real based companies to make a presentation of such motives highly impressive.

    Response 2

    With the thorough review of the paper, it has been observed that although, you have defined some key motives behind the foreign directive investment activities of the business, the discussion could have been made more impressive with more detailed information about the specific motive and with the inclusion of some more motives. The foreign direct investment is a broader phenomenon and hence, its motives are diverse in nature and while discussion the concept of foreign direct investments and the motives of the business behind adopting this practice are quite vast in nature. This is the major weak aspect of your discussion.

    //Similarly to the above mentioned response to the statement, in this section responses have been presented in context to the necessary steps of capital budgeting that are useful to test feasibility ...

    Solution Summary

    The response addresses the query posted in 1414 words with APA References

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