You are a team of consultants with WSC Capital Solutions. Your client is a US manufacturer of manure spreaders. This client has operations and sales across the entire country. Since it has nearly saturated the US market with its manure spreaders, the company is looking to expand its operations overseas. Your client has discussed various methods of establishing themselves as players in the global market place and gaining market share at the global level. The client has decided to venture into the global market place through the strategic purchase of manure spreader plants in other countries. The client would own 100% of these foreign subsidiaries. This will give them immediate access to global markets and instant knowledge about local market preferences and cultural influences. Your client has currently set its sights on spreader producers in Germany, China and Brazil. (These companies have only domestic/local operations and sales.) How will the client evaluate these three international capital investments?

The client applies the NPV method for all its capital budgeting projects. Though your client is very skilled in the process of capital budgeting through your previous consulting engagements, it is new to the international dimension of the capital budgeting process. The client requests your consulting services to explain to them the impact of the international dimension on the capital budgeting process. In a memo of no more than three pages (1 margins top/bottom left/right, Times New Roman 12 font, double spaced, APA style documentation), your team should explain to the client the impact of the international dimension on the capital budgeting process in terms of the following three inputs in the capital budgeting process:

1. Risks of these international investments: What types of risks are there to be considered? How would these additional risks impact your NPV process?
2. Cash flows of these foreign subsidiaries: What complications would you have in estimating the cash flows of these investments? What complications might you have getting access to these foreign cash flows?
3. Weighted Average Cost of Capital: In general how might your cost of capital be impacted, if you raised your capital in foreign markets as well?

You are writing your response to the clients CFO, who is very knowledgeable about financial management and capital budgeting in the domestic context.

Before writing your response you should read the following pages in your text: (Remember you can access the full book in Mindtap by clicking on the symbol for full book.)

• Page 86 Chapter 2 section 2-9i: Taxes on Overseas Income
• Page 106 Chapter 3 section 3-2b: The Case of IFRS versus FASB
• Page 393 Chapter 9 section 9-8c: Global Variations in the Cost of Capital (scroll down. Online you may have to click forward.)
• Page 698-700 chapter 17: Corporate Valuation in a Global Context & sections 17.1 + 17.2
• Page 728-733 chapter 17 section 17-13: Multinational Capital Budgeting

Textbook: Corporate Finance: A Focused Approach, 7^th Edition (2020) by Ehrhardt & Brigham, Cengage Learning.