Financial Management: Principles and Applications, 13/e

19.3 Capital Budgeting for Direct Foreign Investment

Today, there is no ducking the global markets, and it is common for U.S. firms to open manufacturing and sales operations abroad. In fact, in 2011 Yum! Brands (YUM, the parent company of KFC, Pizza Hut, and Taco Bell) invested over half a billion dollars to purchase the Chinese hot pot chain Little Sheep. Direct foreign investment occurs when a company from one country makes a physical investment in another country—such as building a factory in another country. A multinational corporation (MNC) is one that has control over this investment. Examples of direct foreign investment include Yum Brands’ opening of over 700 new restaurants in China in 2015 and Ford’s (F) announcement in 2016 of its ...