International Financial Management: Analysis and Evaluation

International financial
management

TABLE OF CONTENT
Introduction......................................................................................................................................1
Main body........................................................................................................................................1
Que.1............................................................................................................................................1
Question2.....................................................................................................................................3
Que. 3...........................................................................................................................................5
Conclusion.....................................................................................................................................12
REFERENCES..............................................................................................................................13

Introduction
International Financial Management which is popularly known as International Finance. It refers
to the management of finance on the international market (Jinadu and et.al201) . International
Financial Management provides and platform to all the companies through which they can trade
and exchange the money and product with the help of international let them a high profit and
spread brand awareness in the globe. Financial management helps the companies and business of
entire world to deal with each other. In this report a 2 year projected cash flow has been
mentioned. The standard deviation of NPV is also being discussed in this report. Cost of capital
is also being calculated in this report. Internal rate of return for the project is also being discussed
in this report. Net present value any company and investor can recognise the projects and their
highest value so that with the help of net present value they may know the better project and they
may get clarification in which project they want to invest. It is very useful that the monetary
value of money always changes so it is not necessary that the value of money remain the same in
the future. It may decline or it may increase as per the time duration (Davradakis and et.al2019).
So NPV also uses discount factor through which it can provide better result in outcome to the
investor's and also the companies and business so that they can choose best project among
temple of projects and may get higher return.
Main body
Que.1.
Initial investment = 15000
Year 1 Year 2
Returns Probability Expected
value
Returns Probability Expected
value
8000 0.1 800 4000 0.3 1200
10000 0.6 6000 8000 0.7 5600
12000 0.3 3600
Expected
value of
returns in
10400 Expected
value of
returns in
6800
1

year 1 year 2
Present value of cash flows in 1st year = 10400 / [ 1/(1+11%) ^ 1 ] = 9369.36
Present Value of cash flows in 2nd year = 6800 / [ 1/(1+11%) ^ 2 ] = 5521.6
Present value of cash inflows = 14891
A) The expected NPV
If the NPV of the projectis negative then it means that the project will be complete loss for the
company and company should refrain to invest in such project. According to NPV rule, company
should not take the project because it will not give profit to the company (Leyman and
Vanhoucke, 2017.). There are many reasons of NPV going negative. In this case reason which is
assumed that the expected value of the return which is calculated from the project as compared to
1st year got reduced. Already present project is not helping the company to increase the capital
value as the investment is made in different projects. The thumb rule of NPV technique said that
total inflow in the future should be greater than total investment of the company. The above
calculated data shows that company is facing loss because of the less inflow in the year 2. The
first year inflow was positive so in the second year inflow should be reduced to half in terms of
total value (Willigers, Jones and Bratvold, 2017). This is the proof that business will face loss if
they will invest in this project.
b) standard deviation of NPV
Year 1
Returns
(X)
D = (X –
Expected value)
D2 Probability Probability * D2
8000 -2400 5760000 0.1 576000
10000 -400 160000 0.6 96000
12000 1600 2560000 0.3 768000
Variance of returns in year 1 = σ2 1440000
Standard deviation of 1st year= square root of σ2 = σ = 1200.
2