About this Part
The prime sources for long-term financing are the markets for fixed-interest instru-
ments (bank loans, bonds) and stocks. We review the international aspects of these
in Chapters 16 and 17-18, respectively. Expected returns on stocks provide one key
input of investment analysis, so in Chapter 19 we consider theCAPMand the adjust-
ments to be made to take into account real exchange risk. The other inputs intoNPV
computations are expected cashflows, and these are typically quite similar to what
one would see in domestic projects. There is one special issue here, international
taxes (Chapter 20). In Chapter 21 we see how to do the actualNPV, extending the
usual two-step approach—NPVfollowed by AdjustedNPVto take into account the
aspects of financing, relevant in imperfect markets—to a three-step version to sep-
arately handle intra- and extra-company financial arrangements. We conclude with
an analysis of joint-venture projects, whereNPVis mixed with the issue of designing
a fair profit-sharing contract (Chapter 22).