| Course | GF581 Financial Strategies for a Global Environment |
|---|---|
| Unit | Unit 8 |
| Paper type | Cross-border capital budgeting |
| Length | About 1,120 words, 7 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF581 Unit 8
Whose Cash Is Being Valued? A Unit 8 Cross-Border Capital Budgeting Analysis of a Thai Production Line
[Student Name]
Purdue University Global
GF581: Financial Strategies for a Global Environment
Unit 8 Cross-Border Capital Budgeting
[Instructor Name]
[Date]
The membrane maker, its Thai subsidiary and every figure are composite and illustrative; the articles and textbook cited are real.
The Project
The line would add capacity for industrial-grade membrane elements at the company's plant in Rayong. It requires 680 million baht of equipment and 40 million baht of working capital. Operating income is forecast at 95, 103, 111, 120 and 128 million baht over five years. Equipment is depreciated straight line at 68 million baht a year. The line qualifies for a three-year corporate tax exemption, after which Thai tax is 20 percent. At the end of year 5, the line is valued at 360 million baht and working capital is recovered.
Two Viewpoints
The project viewpoint asks whether the line creates value in Thailand, measured in baht. It is the right view for judging the plant's managers and for comparing the line with other Thai investments.
The parent viewpoint asks whether the line creates value for the shareholders of the Milwaukee parent, who can spend only what reaches them in dollars. It counts only cash the subsidiary can remit, after the 10 percent Thai tax withheld on dividends sent to foreign owners, converted at the exchange rates expected when it arrives (Shapiro, 1978).
The decision belongs to the parent, so the parent viewpoint governs.
The Project Schedule, in Baht
1. Year 0: negative 720 million, equipment plus working capital.
2. Year 1: operating income of 95 plus depreciation of 68, no tax, 163 million.
3. Year 2: 103 plus 68, 171 million.
4. Year 3: 111 plus 68, 179 million.
5. Year 4: 120 less 24 of tax, plus 68, 164 million.
6. Year 5: 128 less 25.6 of tax, plus 68, plus the 360 million terminal value and the 40 million of working capital, 570.4 million.
Discount rate. The parent's dollar rate of 9.5 percent, converted to baht terms using the interest rate differential implied by deposit rates of 1.75 percent in baht and 4.25 percent in dollars, gives about 6.87 percent.
Net present value. About 263.8 million baht, or about $7.76 million at today's spot rate of 34.00.
The Parent Schedule, in Dollars
Each year's baht cash flow is assumed to be paid to the parent as a dividend, less 10 percent withholding, and converted at the forward rate for that year. Forward rates imply the baht strengthening about 2.46 percent a year.
1. Year 0: negative $21.18 million.
2. Years 1 to 4: about $4.42, $4.75, $5.10 and $4.78 million.
3. Year 5: about $17.05 million.
Net present value at 9.5 percent: about $4.86 million. Internal rate of return: about 16.3 percent.
The parent's value is about $2.9 million below the project's because 10 percent of every dividend is withheld before it leaves Thailand, a cost that never appears in the project's own books but falls entirely on the shareholders who are making the decision.
Sensitivity: Discount Rate and Baht Path
Parent value under three discount rates and three baht paths:
1. At 8.5 percent: $5.72 million if the baht strengthens 2.46 percent a year, $3.53 million if it holds steady, $1.87 million if it weakens 2 percent a year.
2. At 9.5 percent: $4.86 million, $2.76 million and $1.16 million.
3. At 10.5 percent: $4.05 million, $2.02 million and $0.49 million.
Break-even. At 9.5 percent, the line's value to the parent falls to zero if the baht weakens about 3.67 percent a year, a cumulative fall of about 17 percent over five years. That is within the range of the past decade's movements but well beyond what forward rates imply.
Why the Two Views Can Lead to Different Decisions
A project can be valuable locally and worthless to the parent if withholding taxes are high, if funds cannot be remitted, or if the local currency is expected to weaken sharply. Here both views are positive, so the decision is clear, but the parent's value is the figure to report to the board. Research on multinational budgeting has long emphasized that parent and project values diverge whenever remittance is taxed or restricted (Shapiro, 1978), and practitioner texts recommend calculating both to show where value is lost (Eiteman et al., 2016).
Reducing the Gap
Two steps could narrow the gap. Funding part of the line with an intercompany loan from the parent would let the subsidiary remit cash as interest and principal, which is taxed under different treaty rules from dividends and is deductible in Thailand within transfer pricing limits; tax counsel should compare the two routes. And timing dividends to match the parent's need for cash would avoid holding baht unnecessarily.
Checking the Consistency of the Two Rates
The 6.87 percent baht rate was derived from the 9.5 percent dollar rate using the same interest differential that sets forward rates. That consistency matters: if the analysis discounted baht cash flows at a rate that ignored the expected currency path, the project and parent values would differ for reasons unrelated to the project. As constructed here, the only difference between the two values is the withholding tax, which can be confirmed by valuing the parent's cash flows before withholding: they give about $7.75 million, essentially the project's figure.
What the Analysis Leaves Out
The schedule assumes all cash is remitted each year. In practice the subsidiary may keep some cash for maintenance or future expansion, which would delay dividends and lower the parent's value further. It also assumes the terminal value of 360 million baht can be realized and remitted, which in reality would depend on selling the line or continuing to operate it beyond year 5.
Reporting Both Figures
The board pack will show the project's baht value beside the parent's dollar value, with a one-line reconciliation attributing the difference to withholding tax, so directors can see why the two figures differ and which one supports the decision.
A Note on Inflation
The forecast is in nominal baht. Thai inflation has run below U.S. inflation, which is part of why forward rates imply a strengthening baht. If Thai inflation rose to match U.S. levels, both the operating forecast and the expected currency path would change together, leaving the parent's value less affected than either change alone would suggest.
Recommendation
Approve the second line on the parent's value of about $4.86 million and its 16.3 percent return in dollars. Report the baht break-even of about 3.67 percent annual depreciation to the board, and review the funding mix in the financing memo to reduce withholding costs (Bekaert & Hodrick, 2018).
References
Bekaert, G., & Hodrick, R. J. (2018). International financial management (3rd ed.). Cambridge University Press.
Eiteman, D. K., Stonehill, A. I., & Moffett, M. H. (2016). Multinational business finance (14th ed.). Pearson.
Shapiro, A. C. (1978). Capital budgeting for the multinational corporation. Financial Management, 7(1), 7-16. https://doi.org/10.2307/3664902
The Purdue Global GF581 Unit 8 instructions
Unit 8 of GF581 asks you to value a foreign project from both the project's and the parent's viewpoints. Set out the assumptions: investment, working capital, operating income, depreciation, tax holidays, local tax and terminal value. Build the project schedule in local currency and discount it at a rate consistent with the parent's rate and the interest differential. Build the parent schedule in home currency, counting only cash remitted after withholding taxes and converting at expected exchange rates. Compare the two values and explain the difference. Test sensitivity to the discount rate and the currency path, and compute a break-even currency move. Suggest ways to narrow the gap. Recommend a decision on the governing viewpoint. Cite multinational budgeting research and texts in APA 7.
Inside the GF581 Unit 8 example
The project's costs, forecast and tax holiday open the sample. A section on the two viewpoints, citing Shapiro, explains why the parent's governs. The project schedule lists six years of baht cash flows and derives the 6.87 percent rate. The parent schedule converts dividends after withholding at forward rates. The highlighted sentence attributes the $2.9 million gap to withholding tax. A sensitivity grid crosses three discount rates with three baht paths, and a break-even of about 3.67 percent annual depreciation follows. Sections explain why the views can diverge, citing Eiteman and colleagues, how to narrow the gap, how the two rates stay consistent, inflation and reporting both figures, before a recommendation citing Bekaert and Hodrick.
Reading the GF581 Unit 8 grading rubric
GF581 cross-border budgets earn most of their credit for correct schedules in both currencies and a discount rate consistent across viewpoints. Graders check tax holiday treatment, terminal value and working capital recovery in the project schedule, and withholding and forward conversion in the parent schedule. The analytical share rewards explaining exactly why the two values differ and confirming it with a reconciliation. Sensitivity to the currency path and a break-even figure show judgment. Instructors in this MS in Finance course value practical ideas for narrowing the gap and a clear statement that the parent viewpoint governs. Two schedules that a grader can follow, with Shapiro and the textbooks listed in APA 7, finish the scoring.
GF581 Unit 8 help from the desk
The most common GF581 Unit 8 error is discounting local-currency cash flows at the parent's home-currency rate, or converting at today's spot for every year, which mixes currency expectations into the valuation. Others value only the project's view and recommend on it, ignoring withholding and remittance limits. Tax holidays are applied to the wrong years. The two schedules disagree for reasons the paper cannot explain. Sensitivity omits the currency path. For any foreign project your case presents, keep the method: assumptions, project schedule, consistent local rate, parent schedule after withholding, reconciliation, sensitivity, break-even and a recommendation.
Get a GF581 Unit 8 example written to your instructions
Projected cash flows, the currencies, any withholding or remittance rules the Unit 8 materials state, and the rubric: with those, a custom budget is built from the perspective the prompt specifies and held there line by line. It returns within 24-48h, the first is free, and terms your case leaves open stay bracketed. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF581 Unit 8 questions, answered
Why do the parent and project values differ?
Because the parent receives less than the project generates, and later. Withholding taxes, limits on remittance, cash retained in the subsidiary and fees paid to the parent all sit between the two. If parity holds and every unit of local cash is remitted immediately, the two views agree. The size of the gap measures what the frictions cost, so show it rather than hiding it.
Which discount rate belongs in the local-currency schedule?
One consistent with the parent's dollar rate and the interest or inflation differential between the currencies. Converting the dollar rate through that differential gives a local rate that produces the same value as discounting forward-converted cash flows in dollars. A local rate taken from a different source, such as a local bank's lending rate, usually breaks that equivalence.
Should the budget include the parent's tax on dividends?
Include whatever tax the parent actually pays on the cash it receives, as your course materials describe it. Foreign withholding is almost always in the schedule. Home-country treatment of foreign dividends changes with tax law, so state the assumption you used, cite its source, and show how value moves if it differs. Graders generally reward a clear assumption over an unexplained omission.
Where can I find a free GF581 Unit 8 sample paper?
This page holds a full GF581 Unit 8 cross-border capital budgeting analysis of a Thai production line, valued from project and parent viewpoints with sensitivity, a break-even and APA 7 references.
What baht path would make the line worthless to the parent?
At a 9.5 percent dollar discount rate, the baht would have to weaken about 3.67 percent a year for five years, a cumulative fall of roughly 17 percent, before the parent's value fell to zero.