Finance for International Business Report 2022

Running head: FINANCE FOR INTERNATIONAL BUSINESS
Finance for international business
Name of the Student
Name of the University
Author Note

FINANCE FOR INTERNATIONAL BUSINESS
Table of Contents
Introduction:..................................................................................................................2
Discussion:...................................................................................................................2
Evaluating the investment proposal by estimating components and overall capital
costs:.............................................................................................................................2
Identification of the foreign exchange risk on the international investment or project: 5
Conclusion:...................................................................................................................8
References list and Bibliography:.................................................................................9

FINANCE FOR INTERNATIONAL BUSINESS
Introduction:
The report is prepared to critically evaluate the investment proposal made by
Hatfield manufacturing system Plc which is an engineering firm specializing in the
development, designing, selling and manufacturing of 3D print machines. The
organization has undertaken the trail of supplying the components to the motor
vehicle and aerospace industries that has been successful in terms of the production
cost and durability. Due to the successful of trial, it has been proposed by the
company to manufacture these components by investing in a new plant that is
located in Turkey. The acceptability of the project is determined by evaluating its
feasibility on the financial basis. In addition to this, the report also analyses the
potential impact of the risks of foreign exchange on the proposed investment or the
project undertaken. The financial analysis of the project has been done by the
implementation of the techniques of capital budgeting such as payback period, net
present value and internal rate of return generated by the project (Meyer and Grosse
2018).
Discussion:
Evaluating the investment proposal by estimating components and overall
capital costs:
The financial viability of the project is evaluated by the application of the
techniques of capital budgeting such as net present value, payback period and
internal rate of return (Falkner and Hiebl 2015). The evaluation of the investment
proposal incorporates some assumptions relating to the costs, tax and sales growth.
Such assumptions are listed below:
 The rate of sales growth is expected to grow at 12% after the first year of
operation.
 Labor cost would be comprised of 35% of the total variable cost.
 It is further expected that there will be growth in labor cost every year by 2%
and all the other variable cost will increase by 1.5% per year.
 It is also assumed that every year, there will be increment in the fixed cost by
1%.

FINANCE FOR INTERNATIONAL BUSINESS
 The corporation tax rate in Turkey is 22%, but a lower rate of taxation is
applied for encouraging the DFI projects. On the other hand, the corporate tax
rate of UK is 19%.
 The beta of HMS plc is expected to be at 1.60.
 The full cost of 3D machines are depreciated over the time period of ten
years.
 Every year, the net cash flow generated by the plant would be expelled to
HMS manufacturing plant as dividend.
It can be observed that the total sales generated by the international project in
the first year is TL15518000 which is increasing every year by 12%. Total sales
generated in the third year and fifth year of operation is TL19,465,779.2000 and
TL24,417,873.4285 respectively. The total sales figure has increased to
38,421,996.5697 and 43,032,636.1581 in the ninth and tenth year of operation. The
cost of labor is increasing year on year along with other variable cost. Furthermore,
the total fixed cost of the project is also witnessing an increase with the increase in
the year of operation. Total amount of depreciation changed is remaining same
throughout the life of project at TL1500000. The total amount of earnings generated
after tax is increasing every year that is in the first year of operation, earnings
generated is at TL 11,294,870.4000 and this increased to 16,882,659.1598 and
TL19,213,960.4741. The earnings after tax in the ninth and tenth year of operation
has increased to TL 31,720,502.0399 and 35,844,736.6726.
It is clearly observed from the table that the total cash flow generated from the
international project is increasing every year with the first and second year of
operation generating cash flow of TL 12,794,870.4000 and TL 14,448,689.0790. The
later year of operations has also identified an increase in the earnings after tax from
TL 28,040,438.0561 in the eight year of operation to TL 35,844,736.6726 in the tenth
year of operation.