FIN 4813 International Financial Case Study Analysis – 2 company’s international financing and investing operations in the recent past

Question:

Case Study Analysis – 2  (20%)    1,500 words

This individual report will consist of a multinational company’s analysis with regard to its cost of capital, capital budgeting and foreign direct investment decisions. LO1, LO2, LO3, LO5, LO7.

This case study is based on Unit-3 contents. Please choose a company from the list given below and analyze the company’s international financing and investing operations in the recent past. You may cover the following points:

  • Company’s recent investments in foreign projects / foreign companies /foreign countries; volume and growth in foreign investments; risk(s) faced by the company in making such foreign direct investments; comment on company’s foreign direct investment strategy and potential alternative.
  • How did company raise capital – internally or externally, through equity or bond offerings, locally or internationally? Evaluate company’s strategy to raise capital.
  • Compute company’s cost of capital; critically evaluate how and why it is different from its domestic counterpart.
  • Company’s strategy to choose project; evaluation techniques; key factors for international capital budgeting decisions such as discount factor, expected cash flows, adjustment for risk etc.

List of Multinational Corporations (MNCs)

  1. Toyota Motor
  2. Coca Cola
  3. Citigroup
  4. Nokia
  5. Sony
  6. Carrefour
  7. Nestle
  8. Proctor & Gamble
  9. Vodafone
  10. BASF
  11. Hyundai Motor
  12. Hitachi
  13. Hewlett-Packard
  14. General Electric
  15. Exxon Mobil

Instructions:

  1. This case study is to be done on individual basis and it carries 20% weight in the final assessment.
    1. The word limit of this case study report is 1500. A deviation of 5% on either side is acceptable. The ‘Appendix’ and ‘References’ shall not be counted in this word limit. You must mention the ‘word count’ on the title page
    2. The time coverage for your analysis could be the most recent three years.
    3. You are advised to submit your coursework to Students Office (SO) and collect receipt for your own record.
    4. The following shall be the criteria for marking the coursework:

                         (i)  Depth and coverage of practical issues and theory………..   8 marks

                        (ii)  Analysis and argument………………………….……………….   8 marks

                        (iii) Originality & Presentation formatting………………………. 2 marks

                        (iv) Accurate Referencing of literature…………………………………….  2 marks

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Solution:

Introduction

As a best practice for the multinational companies (MNC), they capitalize on the foreign business opportunities through harnessing an engagement with the Foreign Direct Investment (FDI). The success of such a strategy is hedged on a careful analysis of the overall potential benefits, costs and conducting a country risk analysis prior to implementing their FDI. In this regard, this report focuses on evaluating an MNC cost of capital, capital budgeting and FDI investment decisions. The company of focus is the Toyota company.

Description of the Company recent Investments in Foreign Projects

One of the recent FDI project by Toyota Company include a joint venture assembly plant for passenger vehicles for catering to the affluent Malaysian motorists (Asian Review, 2018). According to Buckley and Casson (2010), a joint venture by the MNCs is a strategy where companies expand or reinvent their facilities through engaging in cross-border mergers and acquisitions (M&A’s) and establishment of international strategic alliances such as joint ventures (JVs) with entities from different countries. The investment by Toyota company in Malaysia would be inclusive of land, construction, and plant which is one of the current largest undertaken through a joint venture since its establishment in 1982.  This investment is expected to be commissioned in 2019 with an annual assembly capacity of 50,000 vehicles matching their existing plant. The primary risk faced by the company in their investment is the decline of the Malaysian manufacturing process which has declined with 45% annually to 21.9 billion since 2015 (Razli, 2009). An option of the company would be a horizontal FDI which involve investing in an amount equal to the company investment domestically in Japan with similar interest. This would be critically instrumental and would have increased profits and income as Toyota in Malaysia records a total sale of 666,674 vehicles in one year alone proving to be a significant market where they can leverage upon. Further, through this approach, it would be possible to extend their products and services in the same market where they have currently based their operations with high precision and experience.

Strategies of Raising Capital The capital was raised through equities. As noted by CIMB (2018), Toyota company had already signed an agreement with CIMB Investment Bank Bhd and Bank of Tokyo Mitsubishi UFJ for setting up a commercial papers programme and a medium-term notes programme. This is a program that offered Toyota company with good flexibility of addressing their short-term………………………………………………………………………………………………………………………………….Please contact us to receive this assessment in full based on your organisation of choice and level of expectations

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